Preamble

The House met at half-past Two o'clock

PRAYERS

[MADAM SPEAKER in the Chair]

Oral Answers to Questions — SOCIAL SECURITY

The Secretary of State was asked—

Pensions Review

Mr. Stringer: If she will make a statement on progress being made on the Government's pensions review. [29074]

The Secretary of State for Social Security and Minister for Women (Ms Harriet Harman): The pensions review that I announced on 17 July last year fulfilled our manifesto commitment. We have received more than 2,000 responses and we aim to publish our proposals for change in the first half of this year.

Mr. Stringer: I thank my right hon. Friend for that answer. Does she agree that the impact of the television licence on pensioners is analogous to the impact of the poll tax? Does she agree also that any review of pensions should take that into account either through direct

compensation in the form of a £2 increase in pensions or by ensuring that pensioners do not have to pay the television licence fee?

Ms Harman: My hon. Friend is absolutely right. Television is very important to pensioners, and we are concerned to take action on all matters affecting pensioners' quality of life. The cost of the television licence will be considered further by my right hon. Friend the Secretary of State for Culture, Media and Sport. The value of the basic state pension is part of the pensions review, but our manifesto commitment is to maintain it as the foundation of income in retirement and to uprate it at least in line with prices.

Mr. Quentin Davies: May I give the Government yet another chance to give a straight answer to a straight question—which they have declined to do until now? Will they calm the serious anxieties and anguish felt by millions of people in this country by stating quite clearly that they have no intention of means-testing or affluence-testing the standard state retirement pension?

Ms Harman: We have made a commitment in our manifesto that we will keep the basic state pension and increase it in line with prices. I thank the hon. Gentleman for giving me another opportunity today to confirm that we will stick to our manifesto promise. We are certainly concerned to do what the previous Government never did: provide extra help for the poorest pensioners. We are doing that through winter fuel payments and by ensuring that those who are entitled to income support receive that benefit.

Mr. Winnick: What the Government have done to help pensioners since last May is, of course, appreciated by pensioners and by Labour Members. However, will my right hon. Friend bear in mind the earlier point about concessionary television licences? Pensioners' finances would be improved considerably if they did not have to pay television licence fees. In view of the rumours that are floating about, which have been mentioned in the


press, will my right hon. Friend do whatever she can to ensure that pensioners receive justice as quickly as possible? Pensioners should no longer have to pay the television licence fee or the fee should at least be halved for pensioners.

Ms Harman: My hon. Friend has repeated those points very strongly. Television licence fees are important when considering pensioners' quality of life and cost of living. My hon. Friend's points are well taken by me, but, more importantly, I am sure that they will be noted by my right hon. Friend the Secretary of State for Culture, Media and Sport.

Mr. Webb: The pensions review is concerned, among other things, with ensuring that people of modest means save more. The Treasury has undertaken an individual savings account review that is also designed to encourage people of modest means to save more. Will the Secretary of State explain the relationship between those two reviews? Why are they being conducted at the same time, involving different people and different time scales? How will she ensure that the two reviews reach consistent conclusions?

Ms Harman: The reviews certainly will be consistent and will reach consistent conclusions. The two reviews are designed to complement each other and to have different purposes. The stakeholder pension, which we are consulting about, will ensure that people on low or intermittent earnings have the opportunity to save for their retirement so that they may retire not only on the basic state pension, but on a good, value-for-money second pension.

Mrs. Humble: Does my right hon. Friend agree that the pensions review and, indeed, the delivery of welfare benefits depend on well-motivated staff? Will either she or one of her Ministers meet me and other hon. Members who represent Fylde-coast constituencies to discuss recent suggestions, which are causing grave concern, that up to 200 jobs will be lost in the major Department of Social Security centres along the Fylde coast?

Ms Harman: I thank my hon. Friend for raising that point. The motivation of staff is critical to the quality of service and to its improvement, which we want to deliver. My hon. Friend asked for a meeting; I shall ask my right hon. Friend the Minister for Welfare Reform whether he is prepared to meet her and her colleagues from the area. My ministerial team and I regularly meet the DSS unions to ensure that they have a good working partnership with the Department, which was never done previously.

Mr. Duncan Smith: Last year, the Chancellor of the Exchequer devalued pensions through his actions in the Budget. That was made clear by the Government Actuary, who advised the Government to change the rebate to the state earnings-related pension scheme to avoid creating problems for those who had opted out. Why did the Government not accept and implement in full the Government Actuary's report, rather than slash occupational pensions?

Ms Harman: The Chancellor acted to ensure long-term investment, which is good for the economy, for pension

schemes and for people with second pensions. I sought the advice of the Government Actuary, who regularly advises the Government. He gave his advice and we acted on it—everything remains completely in order.

Mr. Duncan Smith: The Government clearly did not act on the Government Actuary's advice; they did not implement the changes to occupational pensions that he advised. As a result, those with occupational pensions will now have to pay much more than before to stay out of SERPS. That goes against the Government manifesto commitment to
support and strengthen the framework for occupational pensions.
Why has the right hon. Lady decided to slash occupational pensions?

Ms Harman: As I explained to the House previously—I take this opportunity to explain it again—I sought the Government Actuary's advice, which I considered and on which I acted. The previous Government left hundreds of thousands of people without compensation for the mis-selling of second pensions. We have acted promptly and appropriately, and we are also trying to sort out the mess that the previous Government left in relation to second pensions.

Housing Benefit

Mr. Colman: If she will make a statement on the level of fraud in housing benefit. [29076]

Dr. Whitehead: What plans she has for tackling organised fraud by landlords. [29077]

Fiona Mactaggart: What plans she has to tackle housing benefit fraud. [29082]

The Minister for Welfare Reform (Mr. Frank Field): The Government's resolution to seek out fraud wherever it occurs is matched only by our diligence to seek out those who are eligible but do not claim.

Mr. Colman: I thank my right hon. Friend for that answer. I particularly commend to him the London team against fraud, which consists of all 33 London boroughs working together and sharing information to stamp out housing benefit fraud. Will he deal with the team's concerns about whether banks and building societies can share information with it, or whether, as banks and building societies believe, they are precluded from doing so under the Data Protection Act 1988? Will he consider how he can ensure that the London team against fraud is able to deal effectively with housing mortgage fraud, which is part of housing benefit fraud?

Mr. Field: I shall certainly consider the matter. The idea for a combined effort throughout London was put to the Select Committee on Social Security, and the proposal was implemented by the previous Government. I ask my hon. Friend to take the thanks of the House to his local authority, which regularly exceeds its target for weekly benefits savings on housing benefit fraud.

Dr. Whitehead: I, too, thank my right hon. Friend the Minister for his answer. Does he accept that part of the


problem of fraud by landlords relates to their bad or incompetent management of DSS tenancies? Will he countenance projects whereby good and responsible landlords are encouraged to collaborate with local authorities and manage those tenancies more effectively?

Mr. Field: I can give my hon. Friend that assurance. In the area which I represent in the Wirral, such projects are already occurring.

Fiona Mactaggart: I thank my right hon. Friend for his reply. He might be able to implement two further measures that could help. First, he could make it easier for local authorities, such as Slough, which has been doing a great deal of work in this area, to initiate a prosecution where a claim has been withdrawn. That happens when people think that they are being sniffed around. The claim then disappears and the ability to take action is reduced.
Secondly, it might be possible to consider incentives for local authorities to improve prevention rather than opting for prosecution. I am certain that that would make a real difference, with the result that it would not be necessary to put as much energy into prosecution as is currently being expended.

Mr. Field: Last November, we increased the powers of local authorities to prosecute landlords who are committing fraud. In December, we issued a verification code, which enables fraud to be tackled at the outset of claims. I thank my hon. Friend and my hon. Friend the Member for Putney (Mr. Colman), whose local authority massively exceeds average weekly benefit savings.

Child Support Agency

Mr. Olner: If she will make a statement on the Government's approach to reforming the Child Support Agency. [29078]

Mr. Field: The Government hope to bring forward proposals for reforming the Child Support Agency before the summer is out.

Mr. Olner: I thank my right hon. Friend for his reply. For many in this place, reform will not come soon enough. The previous Government introduced the agency, and it has never worked. It has done nothing for children—in other words, it has done nothing to improve their livelihoods. The sooner that reform takes place, the better.
How widely has my right hon. Friend consulted on reforms? Once consultation has taken place, we must ensure that the appropriate legislation is put on to the statute book as quickly as possible.

Mr. Field: My hon. Friend will be aware that Baroness Hollis, the Under-Secretary of State, is spearheading the review. She has met many people already, as I have done. I am grateful for the critical faculties that Members bring to the outline proposals, which we debated the other day. I make a plea to Members on both sides of the House: when the proposals are published, let us have the most detailed and critical discussion. Last time round, we sleepwalked many of our constituents into a nightmare. [HON. MEMBERS: "Apologise."] We must not do that again.

Miss Kirkbride: In the light of the Minister's earlier answer, will he confirm that in his proposals to reform

the CSA, absent parents will still be expected to make a significant contribution to their children's upkeep, and that the obligation will not fall on to the taxpayer, as before?

Mr. Field: The answer to that question is a resounding yes. I heard one of my hon. Friends saying a moment ago that I should apologise for the CSA. I, as a politician, apologise for being a Member of this place who put the CSA on to the statute book. Responsibility for the CSA rests with the House. I do not approve of the behaviour of those who, like Pontius Pilate, endlessly wash their hands and blame the agency's staff when responsibility for the operation of the agency is political. The House established the CSA and the House will need to reform it.

Pensioner Incomes

Mr. Bradshaw: What assessment she has made of (a) present and (b) future inequality in pensioner incomes. [29079]

The Parliamentary Under-Secretary of State for Social Security (Mr. John Denham): We want today's and tomorrow's pensioners to enjoy security in retirement. Estimates show that the gap between the best and worst-off pensioners will be even wider in future than it is today under current policies, so a key objective of the pensions review is to ensure that pensioners have an adequate income in retirement and that they share fairly in rising national prosperity.

Mr. Bradshaw: Can my hon. Friend confirm that the sum that the Government are spending on extra winter fuel payments is more than would have been expended if we had reintroduced the link between earnings and pensions? There is the added advantage of helping poorer pensioners most, including nearly 7,000 in my constituency in Exeter. Does this not show that things can be done now, notwithstanding the outcome of the pensions review, to help narrow the gap between rich and poor pensioners?

Mr. Denham: My hon. Friend is right. We have taken action to help all pensioners with fuel bills to pay them through winter fuel payments. Help within that has been especially focused on poorer pensioners receiving income support, who have already received their payment of £50. The total cost of the package this year is expected to be about £200 million, which is more than the additional costs that would have been involved in uprating pensions by earnings rather than by prices.

Mr. Gibb: The Secretary of State has told us that the Government sought the Government Actuary's advice and acted properly upon it. What does "acted upon it" mean? Does that mean that the Government implemented the recommendations in full, or in part?

Mr. Denham: We have considered the Government Actuary's report and have taken action.

Mr. Corbyn: Does my hon. Friend accept that, notwithstanding the welcome money for winter fuel, the real way in which to eliminate poverty for many pensioners is to re-establish the link with earnings and to


increase the pension accordingly? The previous Government took more than £20 a week off every pensioner in this country. Private provision cannot—and never will be able to—help the poorest in this country, who often do not have long-term jobs that enable them to buy into occupational pensions. Should we not look to state provision to eliminate poverty?

Mr. Denham: We have already taken action to help today's pensioners. The pensions review will report later this summer. It has involved a series of meetings with Jack Jones and the National Pensioners Convention to discuss the position of today's pensioners and what action can be taken.
Most people who enjoy security in retirement have two pensions: the basic state pension and a second pension, often provided through an invested fund. I am sure that that will be a key element of our strategy for the future.

Mr. Burns: On pensioner incomes, will the Minister confirm that the Chancellor and the Secretary of State have boasted on numerous occasions that the winter fuel payment will be paid to all pensioners in the United Kingdom? Will he now confirm that that is not the case, that anyone reaching pensionable age on or after 6 January 1998 will not receive the payments this year and that the cut-off date will affect up to 150,000 pensioners by the end of March, when the money is finally expected to be paid? Will he consider making the money available to those pensioners, who are getting not a new deal but a raw deal from the Government? Will he explain the fiasco—and apologise to the House for it—in which cheques were sent to pensioners living in residential homes, and why some of those pensioners will be able to keep the money and others will not?

Mr. Denham: The House will remember that, on a number of occasions, the hon. Gentleman voted to increase VAT on fuel to 17.5 per cent. Common sense suggests that once the announcement on winter fuel payments was made, it was essential to make payments as quickly as possible. It was important to have a qualifying period that was easier for pensioners to understand and was operationally deliverable. It was set as the week commencing 5 January. If it had been set later, the exercise could not have been completed in time for payments to be made to help with winter fuel bills.

Income Support (Pensioners)

Mr. Pond: If she will make a statement on the Government's actions to assist pensioners who are eligible for income support. [29080]

Mr. Denham: We are determined to help the 1 million pensioners who are not claiming their income support entitlement. We have commissioned research to find out why they do not make a claim, and, from April, we shall run a number of pilot projects to find the best way in which to encourage them to do so.

Mr. Pond: I thank my hon. Friend for that reply. I am sure that in the pensions review, the needs of the poorest pensioners will be a priority, but, given that Opposition Members continue to peddle the notion that the basic state pension might be subject to a means test, will my

hon. Friend confirm once again that cuts to, and means-testing of, the basic state pension were part of the previous Government's policy and are nothing to do with the present Government's policy, and that the basic state pension will remain a central foundation of pension provision?

Mr. Denham: I am happy to reaffirm, once again, our manifesto commitment on which we were elected, and for which pensioners voted in large numbers. The basic state pension will be retained as the foundation stone for retirement and will be uprated at least in line with prices. I am grateful for the opportunity once again to make that statement to the House.

Mr. Collins: I am most grateful to the Minister for what he just said. Perhaps he will now give a straight answer to my question. Will the Government rule out means-testing the basic pension—yes or no?

Mr. Denham: This Government will keep their promises. We have promised to uprate the basic state pension at least in line with prices. We have already honoured that commitment. From this April, the basic state pension for a couple will exceed £100 for the first time. We deliver on what we promise.

Mr. Hope: Is my hon. Friend aware that many people who are in work cannot save with an occupational pension because their employer does not have such a thing? Those people might not be able to afford a private pension scheme. Indeed, those with caring responsibilities are not at work and therefore cannot contribute. Is he aware that if that situation continues, there will be growing inequality in the years ahead when those people reach pensionable age? Can the Government assure the House that, in the pension review, they will look at how we can provide second pensions that are affordable and accessible to people on low incomes or with caring responsibilities?

Mr. Denham: Yes. The pension review has two key elements: first, our proposals for stakeholder pension schemes, which will be value for money, low cost, flexible and particularly suit those who cannot join an employer's occupational scheme or those for whom personal pensions are far too expensive; secondly, we are also considering—again in line with our manifesto—a citizenship pension for those such as carers who cannot contribute to a funded second pension because of their important role in looking after a member of the family or another person.

Welfare Reform

Mr. Boswell: When she last met representatives of disability interests to discuss welfare reform. [29081]

Mr. Clappison: What recent representations she has received about benefits for the disabled. [29084]

Mr. Denham: We have received a number of representations on welfare reform. My right hon. Friend and I have twice met members of the all-party disablement group to discuss their views on this important issue. The most recent meeting took place last Monday.

Mr. Boswell: I thank the Minister for that answer, but will he confirm that neither he nor his Secretary of State—nor, indeed, briefings from No. 10—has yet answered the basic question: whether the entitlements of the 6.5 million


people with moderate disabilities will be cut as a result of the Government's welfare reform proposals? They need to know—is the answer yes or no?

Mr. Denham: I can reassure the House that the Government want to ensure that those in genuine need receive the support, in cash and in other ways, that they need. No changes will be made without full consultation, particularly with organisations of and for disabled people.

Mr. Clappison: Will the Minister bear in mind the representation that his Department received from the Secretary of State for Education and Employment, who said that transferring the disability living allowance to local authority social services departments in any way would make the disabled the victims of the lottery of local authority discretion? Will the Minister rule that out, as it is worrying many disabled people?

Mr. Denham: We are, as I have said, determined to ensure that the appropriate support, in cash and in other ways, is available for disabled people. We are considering ways in which that can be done as part of the welfare reform process. We will publish our proposals, and they will be subject to the fullest possible consultation.

Mrs. Mahon: Did members of the disability groups raise with my hon. Friend the matter of the complicated disability living allowance self-assessment forms? Will he consider making the forms simpler because many people are losing benefit who need not do so?

Mr. Denham: Many important issues have been raised by organisations of and for disabled people, including the complexity of the assessment process. They will be looked at during the review.

Mr. Barnes: Is the Minister aware of the Government's credibility gap on the future of disability benefits? It has been caused by the cut in single parent benefit and the work of the benefit integrity project, which has led to many people losing their disability living allowance, although they are perfectly entitled to it, and trying to have it re-established on appeal. What are the Government going to do about overcoming their problems with presentation to show that they will not cut out the rights of disabled people in the future?

Mr. Denham: Evidence from the benefit integrity project broadly confirms the initial estimate of the level of incorrectness in that benefit. We have learnt from the project as it has developed, which is why my right hon. Friend recently announced extra safeguards to ensure that no one would have their benefit stopped or reduced unless additional evidence—not just that provided by the claimant—was available. That is a step forward in safeguarding the work of the project and it shows that we are listening to organisations of and for disabled people as the work progresses.

Mr. Burstow: Forty thousand people have been through the benefit integrity project, many of whom have wrongly had their benefit stopped or reduced, but have not appealed. Will the Minister reconsider their cases? They feel intimidated and unable to go back through the appeal process because of the way in which the project

has worked. To ensure that people receive the benefit to which they are entitled and to restore the project's integrity, will he ensure that interviews are reconsidered and claim forms re-examined to see whether they have been completed incorrectly?

Mr. Denham: If people feel that they have not been properly treated, the review and appeal process is available to them. I am sure that decisions have been made in accordance with the law laid down by Parliament, but we have introduced the extra safeguard to which I referred. If people are in the position described by the hon. Gentleman, they should exercise their right to a review or an appeal.

UK Presidency (Women)

Ms Rosie Winterton: What action the Ministers for Women are taking during the UK's presidency of the European Union in conjunction with their European counterparts. [29083]

The Parliamentary Under-Secretary of State for Social Security (Ms Joan Ruddock): The priority of the Ministers for Women has been to ensure that the women's perspective is introduced into the presidency's key theme of employability. Various activities are taking place on that theme. An initiative on action on violence against women is under way as part of our presidency.

Ms Winterton: Will my hon. Friend take the opportunity during the UK presidency to discuss the real problems faced by low-paid women, particularly in finding affordable child care? Will she encourage initiatives on a European level, such as the working family tax credit, which would greatly help some of the poorest women in our society to meet child-care costs?

Ms Ruddock: I thank my hon. Friend for her question. I am pleased to tell her that her view that affordable child care underpins the employability of women concurs with our thinking and our priorities as Ministers for Women in the United Kingdom. We intend to discuss these matters in an informal presidency meeting of Ministers for Women of European Union member states in Belfast on 5 and 6 May. That will enable us to compare best practice, and to show for the first time that the UK Government take child care and the employability of women very seriously indeed. We want to share our thinking with our European partners.

Dr. Julian Lewis: Do the Minister's plans to improve the employability of women extend to the employability of the remnants of the Greenham Common women, of whom she used to be such a prominent supporter?

Ms Ruddock: I am very sorry that the hon. Gentleman takes up valuable time at Question Time to make such frivolous points. The employability of all women in this country is of deep concern to the Government. We believe in equal opportunities. Women want to work, and we shall make it possible for more and more women to take their place in the workplace and to balance their family responsibilities, which they also take very seriously.

Ms Moran: I thank my hon. Friend for that response. I welcome the initiative that the UK is taking under its


presidency. Is my hon. Friend aware that Britain is the poor parent of Europe in respect of child care? My sister, who lives and works in Paris, has been entitled to child care for her three children since they were one year old. My constituents in Luton would dearly love to have such a system. Can my hon. Friend assure us that, during the UK presidency, we shall see an expansion of quality child care?

Ms Ruddock: I thank my hon. Friend for that question. I assure her that we shall have particular regard to good practice elsewhere as we develop a national child care strategy. We shall learn from other countries, and shall for the very first time put into practice a system of quality, affordable and accessible child care for parents and children, whose development will benefit greatly from that opportunity.

Mrs. Gillan: Does the Minister agree that in the United Kingdom, despite a great improvement under Conservative Governments, women's pay for full-time work is still on average only 80 per cent. of men's hourly pay, and that that issue is of great concern to all women? Does the Minister believe that she or the Prime Minister sets a good example to employers, or that the United Kingdom sends a positive message on equality to her European counterparts and gives the right lead, when the Prime Minister appoints her to a ministerial job at a rate of pay £23,623 less than that of her male colleagues? What does that say about the Government's attitude to women employees?

Ms Ruddock: The hon. Lady is perfectly well aware of the technical reasons for the impossibility of paying a salary for the new position.

Mrs. Gillan: Not for men.

Ms Ruddock: The hon. Lady protests, but there are men in the Government who are not drawing ministerial salaries.
The hon. Lady, who has represented her party and the Conservative Government as a spokesperson on women, has something to apologise for to the women of this country. The Government of which she was a member never championed women's needs; they took no trouble whatever to redress the imbalance between women's and men's pay. With the working family tax credit proposals—and, indeed, the minimum wage—this Government will do more to lift the wages of women than the Conservative Government did to lift the wages of any woman in nearly two decades.

Fraud Detection

Mr. Mitchell: What proposals she has for increasing the resources devoted to fraud detection efforts in respect of social security benefits. [29085]

Ms Harman: We are currently spending £400 million a year on tackling benefit fraud. We will take whatever measures are necessary to tackle fraud in social security.

Mr. Mitchell: Does my right hon. Friend agree that it is more sensible to begin the necessary work of reforming

social security with a more vigorous onslaught on fraud and fiddles, whether they are perpetrated by employers or by beneficiaries, than to create an atmosphere of fear and terror by talking of cuts—cuts in benefit, cuts in rates, cuts in eligibility—and continuing the shakedown that the Conservative Government started among the disabled, which is going on at this moment?

Ms Harman: Let me take this opportunity to reassure people with disabilities and people who are claiming benefits that no one who is genuinely entitled has anything to fear from our welfare reforms. However, we want to rebuild support for the welfare state and we cannot do that if people believe that, although the House lays down the rules for entitlement, they can decide for themselves whether they will draw benefits. We will take tough action to ensure that there is no fraud—tough action in relation not only to claimants, but to employers who evade their national insurance contribution responsibilities.
I can report that, after one month of our new hotline to tackle national insurance fraud by employers, the Contributions Agency is now investigating 1,000 new cases of reported employer fraud. Such cases, if they are proved, not only defraud the national insurance fund, but strip employees of their entitlement to pensions and to sickness and other benefits.

Mrs. May: Does the Secretary of State accept that the number of cases of disability benefit fraud has proved to be extremely small? Will she state categorically that that is the case? Will she also reconsider the request from the all-party disablement group for the Government to suspend the benefit integrity project pending an independent review, in the light of real cases of hardship in which disability benefit has been cut or taken away?

Ms Harman: The benefit integrity project is not an anti-fraud project; it is a project to ensure that those who receive disability living allowance are entitled to it. Some people, although they may have been entitled to it when they first claimed, cease to be entitled because their circumstances change. I am sure that the hon. Lady agrees that it is right for us to ensure not only that those who are entitled receive their benefit, but that those who are not entitled do not receive it. As the Under-Secretary, my hon. Friend the Member for Southampton, Itchen (Mr. Denham) said earlier, we are taking steps to improve the quality of decision making in the benefit integrity project.

Mr. Swinney: As the Secretary of State will know, fraud accounts for only 12 per cent. of the 20 per cent. of cases in which disability living allowance has been reduced; the remaining 8 per cent. are the result of other factors.
Following the right hon. Lady's statement and her written answer to me of 9 February on securing additional evidence about decisions made in the benefit integrity project, does she accept that the Government have a responsibility to consider that 8 per cent. of cases and to take the initiative in deciding whether individuals have been properly treated by the Benefits Agency and the project and to restore benefits if that is appropriate?

Ms Harman: My hon. Friend the Under-Secretary made it clear earlier that it is important for anyone who


feels that he has been unfairly treated by the benefit integrity project to understand that he has a right to review if he wishes to take up that option. We introduced extra safeguards to the benefit integrity project so that if it is proposed that someone should have his disability living allowance cut or taken away, action will not be taken until further evidence has been sought to ensure that the decision is right. It is unsatisfactory for benefit to be reduced or taken away and for people to have to wait eight weeks for the matter to be sorted out by a review. That is why we have introduced the extra safeguards. We are reviewing the fraud targets on disability living allowance that were laid down by the previous Government because our evidence so far from the benefit integrity project suggests that they were not right, although it seems that the overpayment estimate probably was.

Lone Parents

Mr. David Davis: What the targets are for the number of lone parents who will obtain work through the new deal for lone parents. [29086]

Ms Harman: The new deal for lone parents is already up and running in eight areas. It will be extended nationally to new claimants in April and to existing claimants in October. About 500,000 lone parents with children over five are bringing up their children on income support.

Mr. Davis: What is the full cost of the scheme per lone parent? Perhaps more important, what is the full cost of the scheme for each lone parent placed in a job?

Ms Harman: My right hon. Friend the Chancellor has made available some £200 million to finance the new deal for lone parents over the next five years. The cost of more than 1 million lone parents bringing up 2 million children on income support at the end of the previous Government's term of office was about £10 billion. People think it inconceivable that the only Government message to lone parents on income support was, "Stay on it until your youngest child is 16." We are confident that our measures will help lone mothers to get into work and will begin to reduce the number of lone parents on income support.

Mr. Michael Jabez Foster: Is my right hon. Friend aware that the £50 a week better off figure that has been mentioned does not include the cost of child care? In my constituency, wages are so low that even with the benefit of the minimum wage, for single parents to be better off it would be necessary to make substantial changes to in-work benefits. Are such changes proposed?

Ms Harman: We are concerned to take all the steps we can to ensure that lone mothers do not have to bring up their children on income support but can get work and make it pay. The minimum wage and the working family tax credit will help low-paid families, the overwhelming majority of whom are lone parents. The cost of child care is an important factor for lone parents. For the first time in this country, we shall have a national child care strategy

and in his Budget my right hon. Friend the Chancellor will make further announcements about further help with the cost of child care through the tax system.

Mr. Duncan Smith: Does the Secretary of State agree that after she launched the programme last year she said that it was a major success and claimed a 20 per cent. success rate? It was discovered that the actual rate of those going into work was 5 per cent. She told everybody to wait because some people still had not had a chance to act on the letters and that the scheme would be much more successful as the months went by. The success rate is now 6 per cent. Is not the reality that the programme is floundering and is not getting people into work? Most of those who are going into work are likely to have obtained jobs without that help. What is the right hon. Lady prepared to do to put the programme back on an even keel and make certain that it is a success rather than the failure that it is now?

Ms Harman: I think that the hon. Gentleman is saying, "Why do we need a new deal for lone parents because they would all get jobs anyway?" As that is not true, do I take it that he is backing the new deal for lone parents? If he is, that is very welcome. In the eight pilot areas, more than half the lone parents have been contacted. That is in stark contrast with what happened under the previous Government, who told them to stay on income support until their youngest child was 16. So far, one in five lone parents who have been asked to attend for interview have attended. That is in contrast with what happened under the previous Government, who never invited them. Of those who have attended, one in three are in jobs.
This is a pioneering approach. The hon. Gentleman left lone mothers on income support. We will help them to become better off, for themselves and for their families, by getting into work.

Caroline Flint: I welcome my right hon. Friend's comments on the new deal for lone parents, who agree with her statements. They are being treated as visible rather than invisible women, which is how they were treated for 18 years under the previous Government. However, many lone parents cannot go to work because they lack education and training. I would welcome my right hon. Friend's comments on how we can get the new deal to work for them, so that they are encouraged to go into education and training. Could we consider opening up to lone parents the new deal education and training option presently available for 18 to 24-year-olds?

Ms Harman: My hon. Friend makes an important point. We want not only to help lone parents get into work, so that they can be better off than they are on benefits, but to ensure that they get opportunities for further education and training. Several hon. Members have raised that matter with me. We are examining whether the new deal can offer lone mothers additional opportunities by providing them with education and training, so that they can not only get a job, but get on in their job.

New Deal

Mr. Day: What the benefits status of those under-25s who take part in the new deal will be (a) during the gateway period and (b) during their participation in any of the four options. [29087]

The Parliamentary Under-Secretary of State for Social Security (Mr. Keith Bradley): The new deal for 18 to 24-year-olds gives young unemployed people real choices to improve their employability and their chances of fully participating in the labour market. During the gateway, young people will continue to receive jobseeker's allowance, provided they satisfy the normal eligibility conditions. Once they enter an option, they will receive either wages or a training allowance.

Mr. Day: Will young people who choose an option other than the employment option be better off than on benefit? If so, will the extra funding come from the social security budget?

Mr. Bradley: As I have explained, if young people take one of the options, they will receive either wages or a training allowance. If they receive a training allowance, they will be able to have passported benefits such as housing benefit and council tax benefit, which clearly come out of the social security budget.

International Women's Day

Ms Julie Morgan: What plans she has to promote international women's day. [29088]

Ms Ruddock: The Government's most important contribution to promoting international women's day will be the debate that we have arranged for this Friday. We are ensuring that Parliament has the opportunity to discuss women's priorities and how the Government are delivering on their promises to women.

Ms Morgan: Does my hon. Friend agree that child care facilities are needed in the House, both for members of staff and for elected Members and that, in the new institutions that we are setting up—the National Assembly for Wales and the Scottish Parliament—child care facilities should be built in from the beginning? Does she agree that Cardiff city hall, one of the options that is being considered to house the National Assembly for Wales, has a ready-made, established, creche? Does she agree that that is a great advantage?

Madam Speaker: That was very international—well done.

Ms Ruddock: My hon. Friend would not expect me to be drawn into where the Welsh assembly should be sited. However, in respect both to this Parliament and to any of the new institutions, the Ministers for Women are extremely keen that Members and people who work in these premises have the opportunity to express their child care needs. It is our view that all institutions should have regard to family-friendly conditions of employment and to assistance with child care. When my right hon. Friend the Secretary of State and I recently visited the European

Parliament, we saw the excellent facilities it makes available not just to Members, but to the many staff who work in the buildings.
I urge my hon. Friend to join us in the debate on Friday, when she will be able to discuss—as, I hope, will many other hon. Members—whether child care is required, where it should be provided and the sort of child care that we want. Our priorities will be discussed on Friday and I urge hon. Members to be here to debate them.

Mr. Gray: Is the hon. Lady aware that an analysis of the list of Labour candidates at the election shows that it contained more public school boys than women? What steps will she take to stamp out that disgraceful inequality before the next general election?

Ms Ruddock: I very much hope that the hon. Gentleman will join us on Friday, when he will be able to express all his concerns about the representation of women, which is a key priority for the Ministers for Women. I can say with pride that our party has put women to the fore and ensured that there is now a record number of women in the House. I hope that the hon. Gentleman's party, and all others, will look carefully at equal representation for women, which I trust they will endeavour to bring about in all new institutions when they have the opportunity to do so.

Child Support Agency

Mr. Bob Russell: How many new cases she expects the Child Support Agency to deal with over the next year; and what changes in staffing (a) structures and (b) numbers she will implement to manage demand. [29090]

Mr. Keith Bradley: In 1998–99, we expect the agency to clear about 560,000 maintenance applications, an increase of more than 56 per cent. compared with the number cleared in 1996–97.
The agency is reorganising itself over the next year to move more staff on to front-line work and to improve telephone contact with customers. In addition, it will centralise work that does not require face-to-face contact with the public.
Those changes will allow the agency to increase staffing levels by 300 by March 1999 while saving £5 million in administrative expenditure.

Mr. Russell: The Minister of State said earlier that Parliament has sleepwalked into the nightmare of the CSA. Is it not time to stop the Rip van Winkle approach to the CSA, bearing in mind the fact that in one year Members of Parliament deal with 18,000 cases? Will the Government provide additional staff to ease the work load of hon. Members dealing with CSA cases?

Mr. Bradley: Rip van Winkle woke up on 1 May. The Government are undertaking a thorough review of the CSA, as my right hon. Friend the Minister for Welfare Reform explained. We will present proposals in the summer and the points raised by the hon. Gentleman will form part of the review.

Pensioners (Fuel Bills)

Mr. Savidge: If she will make a statement on her plans to help pensioners with their fuel bills. [29091]

Mr. Denham: This is the first time any Government have been prepared to help all pensioner households with their winter fuel bills. A total of £400 million has been made available to provide extra help, for this winter and next, to all pensioner households. One and a half million pensioners on income support have already received a payment of £50; other pensioner households will receive £20. Almost 10 million payments will be made to more than 7 million pensioner households. The majority of payments should be made by the end of March.

Mr. Savidge: Northern Scotland will welcome all measures that reduce the misery of pensioners' going to bed unnaturally early for fear of fuel costs and the tragedy of cold-related illness and death. Will my hon. Friend consider what further steps can be taken to reduce the tragedy of that sort of suffering?

Mr. Denham: In addition to winter fuel payments, we have cut VAT on fuel and on materials used in Government-funded insulation programmes, we have abolished the gas levy, there is a review of utility regulation and an interdepartmental group is investigating fuel poverty. The winter fuel payments have been promised for this winter and next. The best approach is to take stock of that policy in the light of the other initiatives and reviews across the Government, including the pensions review, to find out the best long-term way to ensure that pensioners can always heat their homes in the winter.

Mr. Rendel: Will the Minister confirm that 80 per cent. of the extra winter fuel payments will be made in March or later, meaning that almost all pensioners will have to pay their winter fuel bills before they get the money?

Mr. Burns: It is a summer supplement.

Mr. Denham: This is the first time a Government have taken such action. Only in November was it clear that funds would be available for winter fuel payments. We have moved as swiftly as possible to make the payments. The majority will be made by the end of March. No other Government, including the Conservative Government of which the hon. Member for West Chelmsford (Mr. Burns), who is muttering on the Front Bench, was a member, have taken such action to ensure that pensioners can heat their homes in the winter.

UK Presidency (Women)

Dr. Gibson: What steps the Ministers for Women are taking on European Union-wide initiatives during the United Kingdom's presidency of the European Union. [29092]

Ms Ruddock: In addition to what I told my hon. Friend the Member for Doncaster, Central (Ms Winterton), the Ministers for Women are urging all member states to address women's needs for family-friendly employment policies and child care in their national employment

action plans. We also want to tackle all forms of violence against women. During our presidency, we are urging member states to work at a national level to raise awareness of that issue.

Dr. Gibson: What steps is my hon. Friend taking to persuade employers to set up workplace facilities for child care? She will know that many European countries have moved ahead faster than us on this. Will she tell us about the training of people employed in workplace child care facilities? Does she agree that at least a minimum wage would be proper remuneration for such people?

Ms Ruddock: We are concerned about the provision of child care and to ensure choice. Provision by employers is very welcome. We are aware of provision in other nations. We shall study those issues at our conference in Belfast. Quality and training are key to our national child care strategy. A considerable consultation exercise is under way to ensure that the child care provided is good for child development and gives a safe environment. Child caring should be properly remunerated. The minimum wage will give recognition to those who undertake that worthwhile and sometimes taxing work.

Mr. Wilkinson: Will the hon. Lady take the useful initiative with her European counterparts of trying to find out why the majority of European Union countries have a lower rate of divorce than the United Kingdom? Those lower divorce rates result in less damaging and traumatic experiences for children and a lower cost to the social security budget. If she can discover the reasons, will the Government try to do something about them through their social policies?

Ms Ruddock: The hon. Gentleman will recognise that there are different cultural patterns—and that there have been different developments—across Europe. Many of us regret that divorce rates are rising throughout Europe. This country is not unique in that. We have learnt many things in our meetings, but such personal issues will not be brought into the European conferences that I have referred to.

Child Support Agency

Mr. Bill O'Brien: What plans she has to improve the efficiency of public telephone contacts with the Child Support Agency; and if she will make a statement. [29095]

Mr. Keith Bradley: Many of the Child Support Agency's customers have said that the telephone is their preferred way of dealing with the agency. The agency recognises the need to improve its telephone service and is taking forward a number of new initiatives with this in mind.
As many parents have work or domestic commitments during the day, the agency has begun to employ staff to work a wider, more flexible range of working patterns over a six-day week. As well as extending the opening hours when telephone contact can be made with it, the agency will increasingly use the telephone to get in touch with customers at an early stage in their application. The aim is that much more of the business will be conducted


over the telephone than by correspondence. This will allow the agency to gather the information needed more quickly and help speed up the assessment process.
For customers with general inquiries, more resources are to be allocated to the agency's national inquiry line from April 1998.

Mr. O'Brien: Any improvement in the service provided by the CSA is welcome. Will my hon. Friend take on board the need for better training for CSA staff? People are referred from one department to another and computers sometimes go down, which means that answers to queries are not received. The latest problem arises from

the fact that people are being advised that although the Government guaranteed that 70 per cent. of the net wage would be retained by the absent parent, that figure could be reduced to 60 per cent. or less. That problem must be dealt with because it is causing great concern, not only in my constituency but across the country.

Mr. Bradley: My hon. Friend takes a great interest in this subject. As we move towards a more case work-focused, front-line service with greater use of the telephone, training will be an essential feature of that service, and we are determined to put extra resources into that part of the agency's work.

Planning for Communities

The Secretary of State for the Environment, Transport and the Regions (Mr. John Prescott): Madam Speaker, I wish to make a statement on planning for the communities of the future. A document setting out our approach is published today and has been placed in the Libraries of both Houses. The document includes a response to the public consultation on the previous Administration's Green Paper, "Household Growth: Where Shall We Live?".
I hope that we can refocus the debate and, in doing so, change some of the language that we use in it. To my mind, much of the debate so far has been clouded by unhelpful language, crude figures and confused statistics. For example, the term "brown-field" is not helpful. I propose to talk about recycled land, which, of course, can be in cities—[Interruption.] There is no difference at all in the interpretation; "recycled land" is simply a better term. It can, of course, be in cities, towns or villages.
Green-field is too often confused with green belt, as if the two were always the same. Most important, while the technical term "household growth" is sometimes necessary, it does not adequately describe our main concern, which is to develop sustainable communities, now and in the future. I hope that, following today's statement, the Opposition will join us in a sensible debate—which does not seem likely—about how to achieve that aim, while recognising the real difficulties involved in meeting household growth in a sustainable way.
My Department published the latest projections of growth in the number of households in March 1995, under the previous Administration. The projections suggest that around an extra 175,000 households a year will be formed in the 25 years from 1991 to 2016. That is because of population growth and because people are living longer and couples are separating more often. However, household growth has been outstripping population growth increasingly since the turn of the century. It is not new.
The dilemma is clear cut and affects us all—how to accommodate more households and, at the same time, protect our precious countryside, without causing rents, house prices or homelessness to spiral upwards. It is a matter not just of how many households but of where they will live.
There are four key elements in our new approach. The first is increased flexibility. We shall emphasise that the projections are guidance, not building requirements. The second is more decentralisation. Regional planning conferences will have more responsibility and accountability in deciding the most sustainable way of meeting the needs of their communities. The third is making the best possible use of previously developed land and existing buildings. We must put the heart back into our cities and put cities at the heart of our strategy. The fourth is that what I set out today is part and parcel of our determination to achieve better integration of a range of policies that affect communities.
In order to achieve greater flexibility, we are determined to get away from a simplistic "predict and provide" approach in housing, as we have done for road

building. We shall treat the household projections as guidance, not house building requirements. Moreover, we shall allow for greater flexibility in adjusting regional and local plans to ensure that, over time, local provision meets local need.
Decentralisation is an essential aim of the Government—whether in devolution, in establishing the regional development agencies, or in our proposals for London—which I am pleased to see the Opposition now support.
We therefore propose to strengthen the role of the regions in translating projections into regional planning guidance. The regional planning conferences will work together with the Government offices to determine how much extra housing is needed in their regions.
The aim will be to increase the local ownership figures so that local authorities translate the new regional guidance into plans and actions on the ground. I want to see better public information on the consequences of decisions on releasing land for housing, so that those responsible can be held accountable and the public debate can be better informed. I want it to be a truly bottom-up approach.
The conferences may be able to justify lower or higher housing figures than those implied by the projections, but we shall expect local authorities to monitor and report on the effects of their decisions. If the effects are damaging, authorities will need to act—or, in the last resort, we may need to intervene—but the whole philosophy of our new approach is to strengthen local responsibility and to have a bottom-up approach. We shall move to that new approach as quickly as possible in the reviews of regional planning guidance that are already under way. As soon as the new regional planning guidance is ready—possibly as early as next year—it will be open to local authorities to review their development plans.
In considering development plans in advance of new regional planning guidance, I shall continue to treat each case on its merits, taking account of today's statement.
It is our firm policy to protect our countryside and revitalise our towns and cities, by maximising the use of recycled land and existing buildings. One of the most effective ways of relieving the pressure on the countryside is to revitalise our cities and improve the quality of urban life. That is why I have called for an urban renaissance in Britain, requiring a whole range of measures. It is not just a matter of urban housing, let alone planning; it is about tackling the range of problems affecting the quality of urban life—in relation to crime, education, jobs, transport or the environment. Many of the same problems also affect rural communities, to which we must also direct our attention.
Last Wednesday, I unveiled the winner of the millennium village competition. The millennium village is a flagship scheme, providing 1,400 homes on recycled land at Greenwich. The development will be built to the highest quality of architectural and environmental design. Energy use will be 80 per cent. better than average. Every home will be linked to the internet, opening new horizons of communication. It will be a development for the whole community. There will be homes for rent as well as homes to buy, with provision for jobs, shops, public transport, health and schooling. The millennium village will point the way for urban regeneration in future, and I have asked


English Partnerships to seek out other similar sites for urban villages, to share the benefits throughout the country.
That initiative will run alongside our other main programmes: nearly £1 billion under the capital receipts initiative, £250 million announced last week under the estates renewal challenge fund and our other urban regeneration programmes. Such initiatives will help to meet a higher proportion of future housing need on recycled land in our towns and cities, rather than in the countryside.
The target set by the previous Administration was
that, by 2005, half of all new housing should be built on re-used sites".
In practice, they achieved an average of 42 per cent. between 1985 and 1995—rising from 38 per cent. in 1985 to 50 per cent. in 1995. The figures are national averages—ranging from 33 per cent. in the east midlands to 83 per cent. in London—but the target was not based on any assessment of the availability of recycled land.
In future, we shall expect each regional planning conference to make a proper assessment of land availability and set regional targets for the use of recycled land. That has never been done before. It is an important change and it will sharpen the focus of policy and action on the ground. Last week, I asked my Department to work with English Partnerships and local government to create a national database of land use, which will give local authorities reliable information on the amount of recycled land available for housing.
Today, I go further. Local authorities, developers, builders and the professions have all been looking for a lead. To spearhead that unprecedented collective effort, I have established a task force to help make better use of recycled land. I have asked my noble Friend Lord Rogers of Riverside to lead it. It will co-ordinate and develop a wide range of activity and innovation.
I consider that a national target for the use of recycled land can help to guide regions and local authorities, and help them to improve their performance. With our new policies in place, we expect local planning authorities to be able to raise the national proportion of new homes to be built on previously developed land to 60 per cent. over the next 10 years. We shall come back to refine the national target in the light of regional targets when they are known and when our database is established.
We also want for the first time to measure separately the reuse of previously developed land in urban areas and in rural areas, so that we can get a better focus on urban redevelopment. Many of the respondents to the Green Paper accepted that 60 per cent. would not be easy. No one should underestimate the problems and costs of redeveloping some sites, such as those that are contaminated. Indeed, it cost more than £100 million to decontaminate the Greenwich millennium peninsula site alone—a decision taken by the previous Administration.
If we are to make our towns and cities attractive places in which to live and work, we must ensure a good quality of life. That is why we reject so-called "urban cramming" and pressures to build on green spaces in towns. Our parks and green spaces are part of what makes town living attractive. That is why we have strengthened the protection against building on school playing fields—a practice allowed by the previous Administration.
I now come to an important new element in our proposals. We propose to follow a sequential approach to the location of new housing and a phased approach to the release of land. Whenever possible, recycled land in urban areas should be built on first, provided that it can be well linked to public transport, jobs, shops and other facilities. The same tests will apply to the sequence of development of green-field sites. We shall also need to allow for release of empty property and so-called windfall sites. Some of the responses to the previous Government's Green Paper called for economic instruments, such as a green-field tax, to be introduced. As a first step, we want to open up debate on the use of that type of measure. Final decisions on taxation are, of course, a matter for my right hon. Friend the Chancellor of the Exchequer.
Much of the debate has concentrated on urban housing, but we must also allow for the housing needs of people in rural areas. Many country people are deeply concerned at the lack of affordable housing, often because houses are bought by wealthier commuters or as holiday cottages. A young couple in a village have every much a right to a decent home as their counterparts in the town.
Hon. Members will be aware of the recent report by the Rural Development Commission, the "1997 survey of rural services", which highlighted specific problems in the rural economy, particularly after 18 years of the previous Administration. Communities fall into decline and are no longer able to sustain jobs and essential local services. Those problems are particularly acute in our former coalfield communities, which are often in rural areas and which pit closures have left devastated. We must find new ways to address those problems. We want to see thriving communities in our rural areas—a living countryside.
It was the post-war Labour Government who laid the foundations of the modern town and country planning system, including green belts and national parks. The Government remain committed to protecting the green belts and the wider countryside—protection of the green belt is as strong as ever. Any new development, whether in town or country, must be sustainable development. There will be exceptional cases—such as that of Hertfordshire—where pursuing the most sustainable solution may lead to adjustments in the green belts, which is precisely what the previous Administration used to do. Nevertheless, since we came to office less than 10 months ago, some 30,000 hectares have been added to the green belt in boundary changes. I expect that trend to continue in this Parliament under this Government.
Successful community development depends on a wide range of policies. We shall tilt the balance in favour of urban development, not only through the planning process but through fairer regional development, improving our public transport, raising standards in our schools and tackling crime. We shall consult on how best to implement the proposals and take them forward in partnership with those involved, especially the regional planning conferences.
This statement represents a break with the past on one of the most important issues facing us today: how and where we should live. We want to replace the top-down, "predict and provide" mentality of the past with a more responsive and accountable system that is better able to revitalise our towns and cities and protect a living countryside that we all enjoy. I believe that the proposals


will help us to achieve our twin aims of urban renaissance and ensuring that we hand on a green and pleasant land to future generations.

Hon. Members: Hear, hear.

Sir Norman Fowler: Labour Members cheer now, but it would be more impressive had they not cheered exactly the opposite policy three weeks ago. Everyone knows that, however it is dressed up, this is a major Government U-turn. It makes nonsense of everything that Environment Ministers have been saying over the past nine months. How does the Secretary of State square what he said today with, for example, what the Minister for London and Construction was saying a few months ago about the impossibility of the policy that has just been announced?
Against that background, let me ask the Secretary of State a few short questions to find out how deep his conversion goes. How will his announcement affect plans for development in the green-belt land and countryside that he has already personally waved through in Hertfordshire, West Sussex and Newcastle? Will he order a halt on those plans? How does it affect the structure plans of counties such as Hampshire? Will they proceed on the new or the old basis in making their plans?
On the target for brown-field developments, or recycled land as the Secretary of State prefers to call it, why have his Ministers consistently said up to now that a 60 per cent. target is unrealistic? He acknowledged in his statement that his Department's statistics show that the previous Government raised the brown-field use figure not to 42 per cent. but to 50 per cent. Is he aware that our target remains 66 per cent? I have no doubt that in a few weeks' time the Government will have accepted that also.
On Lord Rogers's committee, is the Secretary of State aware that the public will need to be convinced that this is not just yet another Government review? Will the committee be entirely independent? Will it be asked not only to identify brown-field sites but to suggest measures to encourage their use? In that respect, does he recognise that measures such as the new development land tax that he mentioned may be good for the Treasury, but do little to stop development, given the vast difference in price between agricultural and development land?
Is the Secretary of State aware that it is not enough for him to say that although he has approved the destruction of the green belt in one area, he has approved its extension elsewhere? The one certainty of that policy is that green-belt land is permanently lost and that the green-belt principle is undermined.
Opposition Members have campaigned against development in the countryside and in the green belt, and for maximum use of brown-field sites and recycled land. This afternoon, the Government have accepted our arguments. Both we and the public will need to be convinced that the Government's words will be followed by action. The best way for the Government to show a new resolve is by reversing a number of the damaging decisions that they have already taken to destroy the green belt.

Mr. Prescott: I find it difficult to accept that the Opposition spokesman realises that he was in government for 18 years. As he pointed out, and as I fairly said,

the Opposition's record on using brown-field sites ranged from 38 per cent., to 50 per cent. in their last year in government. It was therefore fair for us to say that the average was 42 per cent. I was a little surprised that he raised the matter of targets because, in government, they achieved their target of 50 per cent. in one year—

Sir Norman Fowler: It was more than 60 per cent.

Mr. Prescott: That was before they moved. It was 50 per cent., then, as I understand, a consultation document recommended that 60 per cent. be considered. Then, the hon. Member for South Suffolk (Mr. Yeo) wrote to me saying that I should adopt a target of 75 per cent. I wrote back to ask him whether that was his party's policy. The shadow Cabinet was then immediately convened, and the figure changed to 66 per cent.—all in a matter of weeks. I do not think that we can treat the Opposition spokesman's claims with any seriousness.
I want to have a serious debate. I did not slag off the Opposition in my statement; I did not think that there was a necessity to do so. [Interruption.] Just try and stick with it. We are trying to have an intelligent debate about a serious matter: where people live. I have tried to be helpful in suggesting changing some of the terms. In 12 months, I hope to have more information about where brown-field sites are. I find it amazing that the previous Government had not found out. In order to make a judgment, it is important to find out the amount of recycled land or brown-field sites we have. We are going to do that, and I hope that the House will be better informed as a result, so that we may have a more intelligent debate. [Interruption.] I am dealing with the opening comments of the right hon. Member for Sutton Coldfield (Sir N. Fowler.)
I have said that any decisions that come before me will take the statement into account until the necessary changes that the statement requires are made. I particularly chose to mention Hertfordshire in my statement, to show that I was prepared to break into the green belt in order to connect the area to a transport corridor. The basic principle is about meeting transport requirements, by moving more people on to public transport. The House will have to have more and more debates about that. It is true that, after 10 months in office, there are over 30,000 more hectares of green belt. That is quite important. It shows just how important we think those matters are.
With regard to Lord Rogers's independent review, we hope that he will be able to report in the first 12 months precisely how much land is available. The report will be independent. I am sure that anybody who knows him will agree that he would not accept any proposition that was not of an independent kind.
What we have done today is to indicate a change. It will make for a more intelligent debate. I appeal yet again to the Opposition to join us in that debate. People outside the Chamber are concerned about where their homes and communities will be, whether in rural or urban areas, and look to us to have a proper debate.

Mr. Gerald Kaufman: Is my right hon. Friend aware that his statement will be music to the ears of my constituents, in terms of both the development of what he calls recycled land and


the protection of the living countryside, especially green spaces in towns? My constituents will be particularly pleased to hear his confirmation, in response to the bluster from the right hon. Member for Sutton Coldfield (Sir N. Fowler), that the criteria in his statement will be used in judgments to be made. Is my right hon. Friend aware that the intention, so far thwarted, of North West Water to build a housing estate, office blocks and an hotel on the only piece of open, green countryside adjacent to my constituency, is rejected by thousands of my constituents who have fought the proposal for years? We look to him to approach any planning applications in the light of the criteria in his statement.

Mr. Prescott: My right hon. Friend reminds the House that it is not just urban playing fields but small woodland areas and forests in our towns and cities that need protecting. I cannot comment on the particular case that he mentions, as it may come before me in my quasi-judicial capacity.

Mr. Matthew Taylor: The Deputy Prime Minister's statement is an extremely important step away from the discredited policies of the former Government, under which six out of 10 homes were built on green-field sites—many of them as a result of the overturning of local objections, and some as a result of the overturning of the views of local inspectors.
Would the decisions that the right hon. Gentleman has taken and which were based on the previous Government's policies have been different under these new policies? If so, why does he not announce a moratorium on further major development in the green belt pending the implementation of the new strategies? After all, he has accepted that they may take a year to implement, and just taking them into account is no guarantee that they will be followed.
Why has not the right hon. Gentleman accepted the view of the round table that reported to the previous Government: that 75 per cent. of properties could be built on brown-field—or what he calls recycled—sites?

Mr. Prescott: The hon. Gentleman is right about the different policies pursued by the previous Administration. I may have omitted to answer the point about whether there has been a U-turn. Indeed, I challenge the right hon. Member for Sutton Coldfield to show that anything I have said today differs from what I have said before. [Laughter.] It is no good saying, "Ho, ho, ho!" I will need more evidence than Opposition laughter before I will accept that there has been a U-turn. [Interruption.] Clearly, the right hon. Member for Sutton Coldfield cannot contest what I have said.
As for the 75 per cent. target, I believe that 60 per cent. is difficult enough to achieve. We need to assess how many brown-field sites are available before we can judge how the policy is working. I have set that work in hand.
Changes to plans or moratoriums would require legislation, and I am not in a position to introduce legislation at this stage. I shall, however, take into account the principles that I have identified in my statement. Local authorities, too, will no doubt take them into account when they make their assessments under the new system.

Most of the targets are for 15 or 20 years ahead. I am sure that the new procedures, which will give local authorities a better chance of flexibility and of including the regional dimension, will lead to further changes. Those will be matters for regional planning guidance and conference discussions.

Mr. Andrew F. Bennett: Does my right hon. Friend accept that if the strategy is to work, we must be prepared to look after existing housing areas far better than we have done in recent years? We must be prepared to spend more money on them, especially high-density housing schemes. We shall also need to regenerate the urban parks—where is the money to come from?

Mr. Prescott: I am surprised by my hon. Friend, who fought on the same manifesto as I did at the general election. It spelled out the fact that there would be £5 billion from capital receipts—a huge amount of money—to do precisely what he is calling for. What is more, the Chancellor has provided £800 million for the purpose.

Mr. John Gummer: Will the Deputy Prime Minister accept my congratulations on getting rid of his target of 50 per cent., which is what we achieved, and on accepting the target that we had, of 60 per cent? What part will the round table on sustainable development play in the whole issue? It has suggested that 75 per cent. would be possible.
Secondly, there is a way in which the right hon. Gentleman can go back on decisions that he has already made. West Sussex council is taking him to court. It would be quite possible for him to decline to offer any evidence. That would enable him to do in West Sussex what I understand he has already done in Dorset.
Thirdly, would it be possible for the right hon. Gentleman to devote a little more time to discussing mixed development? I noticed no reference to mixed development in what he said. The key to what we are dealing with is mixed development in our towns—not only social mix, but a mix of housing, shops and offices.
Finally, will the right hon. Gentleman do something for the people of Stevenage, who are to have foisted upon them a development that would not be allowed under his policy, and which I would not have allowed when I was doing his job?

Several hon. Members: rose—

Madam Speaker: Order. Before the Deputy Prime Minister answers, may I appeal to hon. Members? Most hon. Members in the House are standing—only about six are not standing. I obviously cannot call them all. Therefore, there will be only one question each now; otherwise, I shall ask the Deputy Prime Minister to answer only the first question.

Mr. Prescott: The recommendation of the round table on sustainable development—75 per cent.—is a difficult target to achieve. I could not in all honesty recommend that to the House, although I am prepared to reassess those matters once we have far more information. I have set that in hand.
With regard to West Sussex, the matter is before the courts. The principle on which we disagreed was that the local authority wanted to cut its housing programme by 25 per cent. I was not prepared to accept such an extreme cut. Dorset's cut was 1 per cent. of the total. The record of the previous Administration, in which the right hon. Gentleman played some part, shows that he also forced higher targets on some local authorities, which they did not want to accept.
Mixed ownership and living together are closely identified with the millennium urban village concept. I could not go into all the details in my statement, so I shall send the right hon. Gentleman all the aims and objectives—which he has probably read—of that concept. He is right about that, and we are trying to secure it.

Mrs. Ann Cryer: I thank my right hon. Friend for his welcome statement. What immediate guidance can he give to Bradford metropolitan district council regarding its urban development programme, which allocates 1,500 spaces for houses at Silsden, in the green belt, in a beautiful part of the Aire valley in my constituency?

Mr. Prescott: Such matters are controversial. The plan in Bradford has been strongly contested and is, I think, still being contested. My hope is to provide a better system, so that we do not get into such situations, and so that local authorities will have a greater opportunity to determine the figures in a more decentralised way. I have set out the programme for that, and I hope that it will be more acceptable to the people in the regions.

Mr. Kenneth Clarke: I welcome the fact that the Deputy Prime Minister is re-examining policy, and I congratulate him on overruling the unhelpful remarks of his junior Ministers on previous occasions. That makes a practical difference. Will he consider the situation of counties where structure plans have already been settled, such as the county of Nottinghamshire, where the bulk of the development is being allocated to the countryside in the south, and far less of it to the old coalfield sites in the north, which need the regeneration? Will he allow the public inquiries on those structure plans to be reopened? It cannot be right for one policy to apply in some counties, and a new policy, if he has one, to be applied in others.

Mr. Prescott: If the Opposition spokesman was at the Dispatch Box answering for the Government, I am sure that he would give the same reply as I shall give: those matters cannot be reopened at this stage. I have provided an opportunity for a review of projections that are set 25 years ahead. That process will allow us to reconsider those matters. All projections over that period will be taken into account in the structure plans and the long-term development. I am providing a far better process for people to influence growth and development in their areas.

Mr. Andrew Mackinlay: I welcome my right hon. Friend's statement on recycled land. Will he bear it in mind that many existing planning permissions have not been triggered by developers? In my borough, there are 5,500 planning permissions year after year that have not been activated. That should be the backdrop to

any decisions that he and his colleagues make when they receive inspectors' reports on planning applications. Will he be mindful of the need to ensure that where there is new residential development, particularly in the south-east of England, there is a penal tax on landfill and other measures? We must not resolve one problem of providing residential homes by creating an additional environmental problem that often results in land tipping, to the disadvantage of my constituents in Essex and those in other counties in the south-east of England, which is unacceptable.

Mr. Prescott: Those matters are very much under review at present. A conclusion will be arrived at shortly.

Mr. Peter Lilley: Is the right hon. Gentleman aware that my constituents were deeply disappointed when he approved—or said that he had no objection to—plans to build 10,000 houses in the green belt between Stevenage and Hitchin in my constituency? That is the biggest incursion into the green belt since any hon. Member has been in this place. Does the right hon. Gentleman realise that the whole country will view this as a litmus test of whether he has changed his rhetoric or his policies? Is he aware that Hertfordshire county council told me today that he could, without legal risk or the chance of incurring damages, reverse that decision and abort the plan? If he does so, my constituents and I will hail him as a hero. Does the right hon. Gentleman realise that no one will believe that he has changed his policies if he is not prepared to change that decision?

Mr. Prescott: I have some difficulty accepting the Opposition's arguments in this area. As I understand it, they would like local authorities to have more say on such matters and, in this case, the local authorities fully endorsed the proposal. For whatever reason, the local authorities have agreed to that proposal. Therefore, to that extent—

Mr. Lilley: Wrong.

Mr. Prescott: The local authorities agreed to the proposal. I accepted what the panel said about changes to the green-belt area because I felt that the transport corridor encouraged the movement of transport in an urban sense, rather than the pepperpot development that we have seen in rural areas. That is an important part of the environmental sustainability arguments. The previous Administration—in which the right hon. Gentleman was a major player—gave 500 hectares of green belt to a vehicle storage and distribution centre, corporate headquarters, automotive production and an airport runway.

Mr. Keith Vaz: May I congratulate my right hon. Friend on his clear and concise statement and on the excellent choice of Lord Rogers to head the task force? Does he agree that, in order to achieve his aims, we must take a grip on the archaic, inflexible, expensive and bureaucratic planning system that he inherited from the previous Government?

Mr. Prescott: There has been considerable criticism of the planning framework—although I think that every hon. Member would agree that such a framework can play a useful role. We are reviewing the matter at present and


taking account of the many criticisms that have been made. However, I believe that a planning framework is absolutely essential in this area.

Sir Peter Emery: Does the right hon. Gentleman realise that many people in the country, including Members of Parliament, believe that they have an absolute duty to protect the jewel of the British countryside? Once it is bulldozed, it can never be returned to us. Does the right hon. Gentleman realise that, under his present plans, more than 2.5 million new people will go to live in the countryside in the next 10 to 12 years? Does he really believe that that is acceptable?

Mr. Prescott: Whether or not it is acceptable, it happened for 10 years under the previous Administration.

Kate Hoey: I welcome the principles contained in my right hon. Friend's statement. Many of my constituents will now feel hopeful that they may not have to move out of London in order to provide homes for their families. Is my right hon. Friend absolutely certain that we shall find ways of providing affordable housing in London and in our inner cities?

Mr. Prescott: That is a very important matter. Recent information has shown that many people are leaving London, and I believe that they would stay if certain parts of the city were more attractive places in which to live. Improved housing, reduced crime and a better education system are influential factors in determining whether people leave an area. Social housing is a crucial part of the equation, and my hon. Friend knows that we have discussed such development in London. I want to see mixed ownership and different forms of financing house purchase, which would allow for good mixed development in all areas.

Mr. Nicholas Soames: Although the right hon. Gentleman's decision to recycle more brown-field sites is, of course, good news, does he accept that a deep sense of injustice remains in West Sussex about the fact that, even after his statement, he still intends to press ahead with his futile case in the High Court? In the context of his statement, how can he justify overturning his own inspector's decision that West Sussex county council had an impeccable case and that West Sussex could not physically take any more new housing?

Mr. Prescott: I am not taking West Sussex county council to court; the county council is taking the Government to court—that is its decision. Secretaries of State of all Governments have constantly faced such decisions. As the hon. Gentleman says, the matter is before the courts, but I did not believe—I have given some of the reasons why—that a 25 per cent. cut in the total amount of housing for the area was acceptable. I believe that local parties should determine the figures more flexibly in a regional context. West Sussex is a good example of why we need a new system.

Dr. Brian Iddon: I am sure that my right hon. Friend realises that, while the previous Administration lined the pockets of their friends in the

new house building industry, houses in areas such as I represent fell into dilapidation faster than we could improve them. Indeed, in Bolton in 1998, there are 5,000 to 6,000 irredeemably unfit homes. I welcome his statement, but please will he help us to carry out some clearance, so that these areas can be regenerated and people do not have to continue to live in these intolerable conditions?

Mr. Prescott: My hon. Friend makes an important point. The fact that there are some 700,000 empty properties today is a major problem for us. [Interruption.] It is private and public sector housing. I am bound to say that it does not help if hon. Members shout out ideological comments about whether the authorities are Labour or Tory. The House, if it is concerned about homelessness, should be united in dealing with empty properties, regardless of whether they are private or public. We should address the fact that many of those properties are on brown-field sites. The Government are also considering the refurbishment of estates and have started some of the programmes. We are committed to bringing more resources into play—when they become available—to improve and refurbish our estates.

Mr. Tom King: Whatever percentage is chosen for recycled land, there will be a substantial amount of development on green-field sites. Is not the key question how the right hon. Gentleman can ensure that priority is given to the development of recycled land? Did I understand him to say that he would consider further how that might be done? Will the outcome of such consideration be taken into account in the existing system of public examinations and structural plan reviews?

Mr. Prescott: Those are important questions; some of the answers may flow from the reviews that we are conducting. People have not properly addressed the question of the 75 per cent. figure. As the right hon. Gentleman suggests, 25 per cent.—or 1 million of the 4 million houses projected, which is an awful lot—will still have to be built on green-field sites. How we fit those houses into the green-field sites is debatable—both the Government and the previous Administration allowed the green belt to be cut for further housing—but we must address that difficult problem. The sequential test that I am introducing—which, as everyone should agree, is good common sense—already applies to out-of-town shopping centres. We should, therefore, be able to get a better idea of how much we can put on the brown-field sites before we deal with the green-field sites.

Ms Julia Drown: My right hon. Friend's statement will be welcomed by my constituents, whether they live in rural or urban areas. Will he assure the House that he will consider giving local councils greater control over the density of housing to be built in an area, so that developers cannot ride roughshod over local people's wishes and build fewer homes in an area than were intended, thus putting more pressure on our green fields?

Mr. Prescott: That is indeed an important point. The guidance notes will have regard to density of housing.

Mr. David Heath: I welcome what the Secretary of State has had to say, which is in marked contrast to the imperviousness of the previous Government when facing exactly the same arguments.
May I bring the right hon. Gentleman back to the county structure plans, which are key to the planning process in rural areas? Somerset, for example, is in the middle of the process. It has indicated that it does not believe in the figures that have been put forward and would like to see them revised downwards. The examination has been completed in public. Will Somerset be allowed to revisit the examination in public or to consider the Secretary of State's new policy in determining what to submit to Ministers in due course?

Mr. Prescott: I have made my statement. I have no doubt that the matters under discussion will be taken into account in all parts of the country. I am not able to comment on reviewing structure plans, because such issues may come before me. That being so, I cannot comment at this stage.

Mr. Chris Mullin: I welcome my right hon. Friend's statement. May I say, however, that 60 per cent. is not a very ambitious target for the north-east, where many acres are capable of being recycled? There is a good case for stopping all or most green-field developments, to force developers and planners to come up with ways of civilising our inner cities.
I invite my right hon. Friend to Sunderland, where there are acres of listed Victorian properties that are sliding towards ruin. Attempts to refurbish them are undermined, because local authorities are granting planning permissions on green-field sites.

Mr. Prescott: I recall my hon. Friend asking me a similar question about Newcastle a short while ago. I checked things out, and it appears that 77 per cent. of new houses are being built on brown-field sites. That is even better than the targets that we have talked about this afternoon. That achievement cannot be held as a criticism against Newcastle.
It is—[Interruption. There is an argument. I have said that at this stage 75 per cent. is too ambitious. It would be wrong to say that I believe that that percentage can be achieved. That would not be an honest approach. I think that 60 per cent. is possible, and that is the target that I have set the Government in 10 years' time. Within about 12 months, I shall make a statement on the review of brown-field sites, or recycled land, so that we can all make a judgment on the real possibilities. That is the proper approach.
We are talking about the provision of housing, and there is talk of council housing. The green-belt area in the north-east improved under the Durham county plan, involving about 15,000 hectares. That is a major extension of the green-belt area, and one of the reasons why we are doing so well.

Mr. David Curry: The right hon. Gentleman never mentioned the word "money" in his statement. What is his estimate of the additional costs of developing on used sites as opposed to unused sites? Is it his intention to direct additional resources to local government, the new regional development agencies or the apparently reprieved English Partnerships, to finance

the bringing of land into a condition that is fit for development? Is this the death knell for the proposed new town between Ripon and Thirsk, in open countryside?

Mr. Prescott: The right hon. Gentleman is wrong to say that I did not mention money in my statement. I mentioned more than £1 billion in regard to capital receipts, regeneration and estates renewal. If extra moneys are required—I well understand the argument that recycled land is much more expensive to build on than other land, and I have considerable sympathy for it—a judgment will have to be made at a later stage.
The sequential test will tell us how much money will be needed. I worry to some extent that extra pressure that is put on recycled land will have the effect of pushing up land prices. If owners are thinking about the target of 60 or 75 per cent., they may well feel, "Let's hang on to the land." If that is the position, local authorities and other bodies will find it difficult to afford recycled land on which to build.
That is one of the arguments of supply and demand. We must take account of those real problems, which have implications for public expenditure. I do not have sufficient information at present to make a judgment.

Mr. David Drew: I thank my right hon. Friend for his statement. I am sure that he is aware that Labour Members have been engaged with this issue for a long time. I ask my right hon. Friend to accept that villages are prepared to accept development. However, when the local plan is for 25 houses, that is what they want to end up with. Is my right hon. Friend prepared to consider means to ensure that the planning process is able to deliver that sort of development and not a great deal more housing?

Mr. Prescott: The judgment on how many houses will be in villages or in urban areas is best left to the new framework that I am proposing. The more flexible approach allows all the different bodies to reach agreement and decide on the areas. Whether it is 25 houses for a village or 1,000 for an urban area, the judgment will be made in the local area. The flexibility that I am introducing will make the system more effective than the existing arrangements.

Sir Paul Beresford: The house projection figures reflect social change over the years. Some of those changes are definitely desirable, but many would consider some to be undesirable. Will the Labour Government attempt to influence any of the undesirable ones?

Mr. Prescott: The hon. Gentleman should be more specific about what he feels to be undesirable.

Mr. Bill O'Brien: I thank my right hon. Friend for his statement, and in particular his reference to strengthening local responsibilities. Last year was the 50th anniversary of the Town and Country Planning Act 1947, and bringing responsibilities back to local areas is welcome. If he wants to develop a millennium village in West Yorkshire, I can offer him two sites. Horbury and the former mining village of Sharlston would make admirable sites for a millennium village.

Mr. Prescott: My hon. Friend has a long history of wishing to see the decentralisation of Government decisions, so I well understand why he welcomes the proposals that I announced today.
As regards making a bid for a millennium village, my hon. Friend's is the second application that I have received. The first was Hull.

Mr. John Bercow: The Deputy Prime Minister mentioned the possibility of a tax on green-field sites, which was originally trailed some time ago. Will he confirm that if such a tax goes ahead, he will ensure that the proceeds from it are reinvested exclusively for the betterment of rural areas and will not be confiscated by the Chancellor for his own nefarious purposes?

Mr. Prescott: I did not hear the last part. It did not sound as if it was worth while anyway.
On taxation arrangements, the decision will be made at the appropriate time by the Chancellor.

Mr. Neil Gerrard: My right hon. Friend was far too generous to the previous Government when he described their policies as "predict and provide". They may have predicted, but they certainly did not provide affordable social housing. I hope that he will ask regional planning conferences to set specific targets on social housing.
With regard to town centres, I ask my right hon. Friend to look at some of the schemes that were successful but grossly underfunded, such as living above the shop, and whether we can put more effort and money into such schemes.

Mr. Prescott: We are looking at those matters. The judgments on social housing will be made by the local authorities with the regional planning conferences. We have a major part to play, with our housing programmes. My hon. Friend mentioned the "predict and provide" policies of the previous Administration. During their time in government, the Conservatives produced 1 million fewer houses than the average building programme of a decade earlier.

Mr. Cynog Dafis: I am glad that the Deputy Prime Minister spoke about a living countryside and thriving communities in rural areas, but how does he reconcile that with the Government's apparent intention to use the current crisis in farming as a way to bring about a radical downsizing of employment in agriculture? Does he agree that if that downsizing occurs and if the crisis continues, we shall see a catastrophic decline in rural areas, and their economic viability will be pulled out from under them?

Mr. Prescott: I have a great deal of sympathy with what the hon. Gentleman says. There has been a massive change in the economic circumstances of rural areas, which is largely because of considerable changes in agriculture. The report that I mentioned shows the decline in essential services in rural areas. The solutions that we have put forward—to work with rural areas and to bring in regional development agencies—will play a major part in improving the situation in rural areas. It could not be worse than what happened under 18 years of Tory government.

Mr. Hilton Dawson: I commend my right hon. Friend's statement, which will be regarded

as enlightened by urban and rural communities, and thank him for his rational approach in the face of mischief making and misinformation. Will he assure me that under the new planning system, which will remove so much that was bad from the previous Government's system, parish and town councils will be able to estimate the housing needs and environmental capacity of the communities that they know so well?

Mr. Prescott: Under the new planning system, parish and town councils, while not making the decisions, will have greater influence through the regional conferences. Decisions will not be passed from top to bottom. Councils will be able to determine their own areas and decide, exercising greater flexibility, how they will be spread within the region.

Mr. James Paice: Does the Deputy Prime Minister accept that bragging about the size of the green belt is irrelevant and that what matters is where it is? Constantly removing green belt from the inside and expanding by greater percentages outside does not protect communities in the cities from sprawl or the countryside from development. Unless the green belt is inviolate, it fails in its principal purpose.

Mr. Prescott: It was not inviolate under the previous Administration. I can give the hon. Gentleman the figures, if he tables a parliamentary question. Previous Secretaries of State had to make balanced judgments. I do not criticise that. The green belt became an issue only because we were told that we were cutting it, and the record—[Interruption.] Every Government, including the previous one, built on green-belt areas. We have increased the green-belt area by more than 30,000 hectares in less than 10 months. That is a pretty good record.
The hon. Gentleman has a fair point, which Secretaries of State have to bear in mind when judging planning matters. I may allow house building on the edge of Stevenage's green belt, for example, and people may say that providing green belt elsewhere does not necessarily satisfy demand. I understand the point, but could be more sympathetic: people in urban areas, too, like green-field sites, but the Conservative Administration constantly sold such sites—school playing fields, for example—and were indifferent to green-belt considerations.

Mr. Mike Hall: I welcome my right hon. Friend's statement, because it signals a significant policy change. The previous Administration's planning approach was guided by a presumption in favour of development. Local authorities would refuse planning applications, only for decisions to be overturned on appeal and costs awarded against them. A more democratic approach to local decision making will allow the protection of green-field sites.

Mr. Prescott: How could I possibly disagree?

Mr. Bernard Jenkin: May I welcome the right hon. Gentleman's policy change on targeting recycled sites? I should be grateful if he enlightened me as to where that leaves Essex, which has already agreed in principle to an extra 85,000 homes. Will he shed light on these shadowy new organisations, regional planning conferences? Is he aware that he has changed his policy?


Will the conferences be accountable to the House or will they be in planning experts' limbo, and immune to accountability, which will allow the planners' cabal to proceed relatively unsupervised?

Mr. Prescott: As I said in my statement, the responsibilities of the Secretary of State have not changed.

Several hon. Members: rose—

Madam Speaker: Order. I am bringing this debate to a close. We shall no doubt return to these matters very soon.

Points of Order

Dr. Nick Palmer: On a point of order, Madam Speaker. I should like to correct a statistic that I gave the House two weeks ago. When I introduced the Acquisition and Possession of Air Weapons (Restriction) Bill, I said that 7,000 police officers had been injured and one had been killed by airguns in recent years. It turns out that that was the number of injuries sustained by the general public, whereas I interpreted it as injuries sustained by the police. I want to correct that. I am appreciative of the hon. Member for Blaby (Mr. Robathan), who drew the error to my attention. I apologise for unintentionally misinforming the House.

Madam Speaker: The House is grateful to the hon. Member.

Mr. John Swinney: On a point of order, Madam Speaker. I want to raise an issue relating to the Committee stage of the Scotland Bill, which we are about to commence.

Madam Speaker: Can the point of order wait for the Second Deputy Chairman of Ways and Means, who is in charge of the Committee stage and has the authority to deal with the hon. Member's point?

Mr. Tam Dalyell: On a point of order, Madam Speaker. You have been very generous with statements, private notice questions and points of order on Iraq. Have you had any request from the Attorney-General to make a statement on whether Her Majesty's Government are trying to build into a new Security Council resolution the authority, based on international law, for military action to be taken against Iraq in the event of a further breach of agreement? If so, that is, by implication, a recognition of the fact that any military action by the United States is illegal under international law. Have you received any such request from the Attorney-General, to whom I have spoken personally?

Madam Speaker: I have received no such request from the Attorney-General or from any other source on that matter.

SCOTLAND BILL (PROGRAMME)

Motion made, and Question put forthwith, pursuant to Order [13 January],
That the Order (13th January] relating to the Scotland Bill (Programme) be amended by inserting, after paragraph 1, the following paragraph—
'1A. On the fifth allotted day paragraph (1) of Standing Order No. 15 (Exempted business) shall apply to the proceedings on the Bill for one hour after Ten o'clock'.—[Mr. McFall.]

Question agreed to.

Motion made, and Question put forthwith, pursuant to Standing Order No. 82 (Business Committee),
That the further Report [19th February] from the Business Committee be now considered.—[Mr. McFall.]

Question agreed to.

Report considered accordingly.

Resolved,
That this House doth agree with the Committee in its Resolution.—[Mr. McFall.]

Following is the report of the Business Committee [19 February]:
That it had come to a Further Resolution [19th February] in respect of the Scotland Bill, which it had directed him to report to the House:
That the Resolution of the Committee reported to the House on 22nd January be varied so that—

(a) the fifth to eighth days allotted under the Order [13th January] to proceedings in Committee of the whole House shall be allotted in the manner shown in the Table set out below, and
(b) each part of the proceedings shall, if not previously brought to a conclusion, be brought to a conclusion (in accordance with the Order) at the time specified in the third column of the Table.

TABLE


Allotted day
Proceedings in Committee
Time for conclusion of proceedings


Fifth day
Clause 69
7.00 p.m.



Clause 70
7.45 p.m.



Clause 71
8.45 p.m.



Clauses 72 to 80
10.00 p.m.


Sixth day
Clause 81 and 82
5.30 p.m.



Clause 83
8.00 p.m.



Clauses 84 to 91
Schedule 6



Clauses 92 and 93
9.45 p.m.



Clauses 94 to 109
10.00 p.m.


Seventh and eighth days
Remaining proceedings (according to time limits to be determined by a further report or further reports of the Business Committee)
10.00 p.m. on the eighth day

ROYAL ASSENT

Madam Speaker: I have to notify the House, in accordance with the Royal Assent Act 1967, that the Queen has signified Her Royal Assent to the following Act:
Greater London Authority (Referendum) Act 1998

Orders of the Day — Scotland Bill

[5TH ALLOTTED DAY]

Considered in Committee [Progress, 12 February].

MR. MICHAEL LORD in the Chair]

Mr. John Swinney: On a point of order, Mr. Lord. I should like to draw your attention to a press announcement by the Scottish Office this afternoon. It announced a consultation paper on the details of the Scottish Parliament's tax-varying powers, which are the subject of our discussions. I called at the Vote Office at 4.15 pm to try to obtain a copy of that document, but it was not available. That is unusual, as it contains an interpretation of the contents of the clauses before us today, to which hon. Members have tabled amendments.

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): I understand that the Minister would like to respond to that point.

The Minister for Home Affairs and Devolution, Scottish Office (Mr. Henry McLeish): Copies of that documents can be obtained in the House of Commons Library, and I apologise for any inconvenience.

Mr. James Wallace: Further to that point of order, Mr. Lord. I was unaware of this difficulty until the hon. Member for North Tayside (Mr Swinney) made his point of order. If the press have been informed, would it not have been a simple courtesy to send a fax message to hon. Members who are known to have an interest in these matters?

The Second Deputy Chairman: I think that the Minister has made the matter clear.

Clause 69

POWER TO FIX BASIC RATE FOR SCOTTISH TAXPAYERS

Mr. Michael Ancram: I beg to move amendment No. 352, in page 29, line 7, after 'Scottish', insert 'income'.

The Second Deputy Chairman: With this, it will be convenient to discuss the following amendments: No. 353, in page 29, line 16, after 'Scottish', insert 'income'.
No. 354, in page 29, line 19, after 'Scottish', insert 'income'.
No. 355, in page 29, line 20, after 'Scottish', insert 'income'.
No. 358, in clause 70, page 29, line 36, leave out 'a' and insert 'an income'.
No. 359, in page 29, line 39, after 'Scottish', insert 'income'.
No. 360, in page 29, line 43, leave out 'a' and insert 'an income'.
No. 361, in page 30, line 5, leave out 'a' and insert 'an income'.
No. 362, in page 30, line 13, after first 'the', insert 'income'.
No. 363, in page 30, line 16, leave out second 'a' and insert 'an income'.
No. 364, in page 30, line 26, leave out second 'a' and insert 'an income'.
No. 365, in page 30, line 27, leave out 'a' and insert 'an income'.
No. 369, in clause 71, page 30, line 31, after 'Scottish', insert 'income'.
No. 383, in clause 72, page 31, line 36, after 'Parliament's', insert 'income'.
No. 386, in page 31, line 42, after 'Parliament's', insert 'income'.
No. 391, in page 32, line 14, after 'Parliament's', insert 'income'.
No. 394, in page 32, line 19, after 'Parliament's', insert 'income'.
No. 395, in page 32, line 21, after 'Scottish', insert 'income'.
No. 398, in clause 73, page 32, line 33, after 'Scottish', insert 'income'.

Mr. Ancram: Let me say first, with reference to the points of order, that I find it extraordinary that we should be told at the beginning of the debate that there are papers in the Library about which we have had no notification, the understanding being that we should sit at the Library door waiting to see what papers go in, lest any should be relevant to the debate. It is a disappointing start, and I hope that if there are any relevant issues in the paper—which I hope one of my hon. Friends has now gone to the Library to secure for me—the Minister will take the opportunity to highlight them, so that we can discuss them today.
The amendments comprise the first of a number of groups that we shall debate today relating to part IV of the Bill. They deal with the tax-varying powers of the Scottish Parliament. Having read this part of the Bill a number of times since its publication, I consider it the most confused piece of legislation that I recall reading in a long time. It is muddled, it is obscure and it is a cause of uncertainty—and, therefore, a cause of concern—about a matter that is very important to many people in Scotland.
I was surprised at what appears to be a general lack of interest among the other parties in a matter that was, after all, a central part of the referendum debate. I see from the amendment paper that the Liberal Democrats have tabled only one amendment to part IV, although they were never backward in coming forward to table amendments on the other parts. The Scottish National party has tabled eight amendments. That suggests that, having secured endorsement through the ballot box for the power to vary, those parties are now anxious to push on to the back burner the fact that the Scottish Parliament will almost certainly mean higher taxes for people living north of the border.
I appreciate that the vote on 11 September settled the issue of whether there would be a tax-varying power, and we accept that the Scottish people wish the Parliament to

have the limited tax-raising power to which the Government referred in the White Paper. However, that cannot mean that the whole issue can now be swept under the carpet, in the hope that, in the run-up to the first elections to the Parliament, the electors of Scotland will not be aware of the potential effect on them. The issue will be of major importance when we come to the elections, and I hope that we can debate in detail today some of the uncertainties and concerns that have been voiced by people all over Scotland about this part of the Bill.
It is essential to ensure that the legislation delivers a power that is no more and no less than what was endorsed in the referendum. As we all understood it, that was the marginal power to vary the standard rate of income tax up or down by a maximum of 3p—and nothing else. That is the question which I understood to have been put to the Scottish people, and they endorsed it. In the amendments, we seek to achieve such a position, and to do so in a way that is beyond peradventure.
The amendments stem from a genuine suspicion that somewhere in the tangled legislative undergrowth are hidden taxation powers about which the people of Scotland were not told and do not know. The Minister shakes his head; as the debate progresses, we shall see whether he can give us the assurances that he and his colleagues have so far distinctly failed to give us. I must tell him that our suspicion is not without cause. During our debates on the Bill that became the Referendums (Scotland and Wales) Act 1997, in the summer of last year, we sought—unsuccessfully here, but successfully in the other place-to insert the word "income" before the word "tax" to make it clear beyond doubt that the power to vary would be limited to income tax alone.
We were given bland answers by the Minister—bland answers which I fear may yet return to haunt him. When we tried to insert the word "income", he said:
If we are to add the word 'income', why not also include the 3p in the pound limit or a definition of who should pay the tax?"—[Official Report, 30 July 1997; Vol. 299, c. 409.]
That was his reason for not inserting the word "income". However, the 3p in the pound limit is in the Bill, along with a rather unsuccessful attempt to define who should pay the tax. We have a right to be suspicious.

Mr. McLeish: Will the right hon. Gentleman give way?

Mr. Ancram: I shall finish the point and then give way to the Minister.
We were met with a blanket refusal to accept the amendment, and an amendment from the other place was overturned here. So firm was the Government's opposition that it could be justified in logic only by the belief that there was a need to keep open the option to vary other taxes or introduce new ones. When the matter went back to the other place, Lord Sewel, the Minister responsible for the issue there, gave the reason for the word "income" not being in the Bill. He said:
To add the word 'income' would create a false sense of precision, because it is limited."—[Official Report, House of Lords, 31 July 1997; Vol. 582, c. 319.]
Presumably that means that the definition that "income" would have given to the power was limited in a way that the Government found unacceptable because it would


have conferred a false sense of precision. That gives rise to the suspicion, not only in my mind but in the minds of many people in Scotland, that there is something behind this.

Mr. McLeish: The only suspicion lurks in the right hon. Gentleman's mind. There are two issues. First, the referendum on 11 September contained two parts. The first related to the wording of the ballot paper, and the second was the reference to the White Paper. The two taken together meant that it was unequivocal in the sense that it was income tax. Secondly, clause 69(1) refers to "income tax" and the clause heading is
Power to fix basic rate for Scottish taxpayers".
The word "income" is before the word "tax". Some 19 amendments have been tabled to make a point that is included in the second line of clause 69.

Mr. Ancram: I have carefully read the Bill. Clause 69(1) refers merely to the section applying for any year of assessment for which income tax is charged. If the Minister is right and that means that every other reference to tax means income tax, he will have no difficulty accepting my amendment.

Mr. Wallace: Will the right hon. Gentleman give way?

Mr. Ancram: I shall give way in a moment. I want to return to this issue. I shall certainly give way to the Minister if he can explain what his noble Friend meant when he said that to add the word "income" would create a "false sense of precision". Those words were either meaningless or they meant that there was some limitation that the Government could not accept.

Mr. Wallace: The right hon. Gentleman has said that he has looked carefully at the relevant part of the Bill. The Minister spoke about clause 69(1). There is a reference to the "Income Tax Acts" in clause 69(2). To what other taxes could the measure apply if the word "income" were not included? The Minister also spoke about 19 amendments being tabled, but that is easy to do when only one word is starred. What other taxes has the right hon. Gentleman identified?

Mr. Ancram: It is not a question of taxes that I have identified.

Mr. McLeish: Answer the question.

Mr. Ancram: Perhaps the Minister would allow me to make my speech in my own way. He is not a great example of how to answer questions. I think that we have had only one answer from him in about six months.
We have tabled the amendments so that we may be reassured that no taxes other than income tax are involved. I do not want to pre-empt a later debate on the guarantee in the White Paper about the £450 million that 3p could raise and how that would be achieved regardless of what happens to the tax base. Apparently that is outwith the 3p that is mentioned in the Bill.
What form of tax will be used to raise that money? I hope that we shall get an answer to that, because I have been asking about it for a long time. I seek answers

because the Scottish people and Scottish business in particular require reassurance on this matter and I have not yet received it.

Mr. Nick Hawkins: In pressing the Minister on the issue, my right hon. Friend quoted from the speech by Lord Sewel. Does he share my concern that, later in his speech, Lord Sewel spoke about what is and what is not covered in terms of savings and dividends? Does that not increase the suspicion not only of Opposition Members but of the business community and people in Scotland?

Mr. Ancram: I am grateful to my hon. Friend for raising that point. The whole of Lord Sewel's response suggested that more than income tax was at issue. He went on to raise other hares which are still running, and the simplest way to put those hares to rest is to accept our amendments. We seek to ensure that, under the legislation, no tax other than income tax can be at issue, and that, without further primary legislation, and, indeed, probably further endorsement by referendum, no other taxes can be brought into play and no new taxes can be introduced. That was the understanding from the White Paper, and we seek reassurance on that.
We are concerned that the Bill contains no provision to exclude other taxes. Clause 72(3) confines changes to the tax powers to income tax when the Treasury has altered the United Kingdom's tax system. It does not prevent extra taxes from being levied if 3p does not raise the sum to which I referred; nor does it prevent the Scottish Parliament from raising additional revenue indirectly through new local taxes.
Some other taxes have been openly canvassed by various interests, and all of them are possible. A tourist tax has been suggested, and there has been talk of a local sales tax. Scottish business has been alarmed by rumours that the unified business rate might be reconstituted, thus placing an even higher burden on that sensitive and vital sector.
This matter is not an academic concern which can be brushed aside with talk of agreements and understandings. Future prosperity under a Scottish Parliament will depend largely on the performance of the Scottish economy and the confidence of Scotland's business sector. The greatest enemy of business confidence is uncertainty, and the greatest cause of uncertainty is the possibility of sudden tax changes or tax rises. That is bad for inward investment, for enterprise and for jobs.
There could be no more damaging background to the Scottish economy than for it to be thought of as a prospectively high-tax economy. That would not only be damaging in the borders, where great anomalies would immediately be created, but would affect the cost structure of Scottish business, which would damage competitiveness and undermine our ability to export. It would threaten to penalise people for working and living in Scotland, and would drive expertise and jobs southwards.
The amendments are important because they replace uncertainty with certainty, and create confidence where, at the moment, there is a distinct lack of it. Their acceptance can make it clear that what was said during the referendum is still true and that Scotland is not about to become the high-tax centre of Europe.
All our amendments to part IV of the Bill are essentially designed to clarify the legislation and remove uncertainty, and we shall argue them in detail. They were tabled because of what clause 69 does, but also because of what it fails to do. It does not, in terms, exclude forms of direct taxation other than income tax. In the light of the White Paper, the £450 million that is guaranteed to the Scottish Parliament from the 3p—which is index linked against possible changes to the income tax structure or variations of the tax base as a result of changing economic conditions which could reduce the tax take—raises the almost certain possibility of some form of taxation other than the standard rate of income tax. We need an answer on that today. Indeed, the Government effectively admitted as much when, during the referendum campaign, the Chief Secretary to the Treasury, a Scottish Member, let slip on television that they would have to find a substitute—that was his word, I think—if those circumstances arose.
The people of Scotland and, indeed, Scottish Members have a right to know what that substitute will be. We will deal with the question in detail under later amendments, but the principle behind it is germane to this clause and to these amendments. Restricting the clause's power to levy tax to income tax, as the White Paper did, but the Bill fails to do, will go a long way to achieving that.
The Minister said that I was creating suspicions. He knows that the uncertainty about which I am talking is not exclusive to members of my party. That uncertainty is real. It exists throughout Scotland. The Government themselves had to reassure the Scottish Confederation of British Industry directly in a meeting some time ago—I think at the end of last month—and again last week during Scottish Question Time, that this provision will have no knock-on effect on capital gains tax.
If the provision is so clear, why did the CBI, with all its expertise, say to the Minister, "Please ensure that this does not have a knock-on effect on capital gains tax"? Why was the Minister required to give that assurance? Why cannot the matter be cleared up by having the simple expedient of our amendments? Business men cannot find reassurance in the Bill. We want to give it to them, and I cannot understand why the Government wish to resist that.
There are vicarious ways by which the Scottish Parliament could raise tax, but which, again, are not spelt out in the White Paper. We know that the Parliament will redistribute revenue support grant and will have the power to alter the business rate. We know, too, that, by withholding central resources, it could effectively force local government to raise tax for the Parliament, allowing itself the spending benefit of the resources retained in pushing local government to raise local taxes.
The Scottish business community's greatest fear about the Scottish Parliament is still the abolition of the uniform business rate and the return to the previous situation, whereby councils set business rates and Jenner's in Princes street paid more in business rates than Harrods in Knightsbridge. Those are genuine uncertainties and worries, which the Government have a duty to resolve.

Mr. Dominic Grieve: I had the opportunity today of reading the Government's press release dealing with capital gains tax. It makes it clear that the tax on capital gains is computed by reference to

income tax rates, but that the Government have chosen not to treat capital gains tax as taxable under the Scottish variable rate scheme. Is it not true that if this is simply a Government administrative decision in relation to that form of taxation, it can be equally easily administratively changed, unless they clarify the position?

Mr. Ancram: I am grateful to my hon. Friend for pointing that out. That is another reason why Scotland's businesses are uncertain, doubtful, worried and not taking investment decisions until they have clarification. The ambiguity of language appears time and again from the Minister, Lord Sewel and Government press releases. I hope that the Minister will take this opportunity to clarify the issue and to create confidence where, at the moment, there is doubt.
The Government fought the referendum proclaiming that business in Scotland had nothing to fear from devolution. Indeed, the White Paper was clear in its desire to exclude business from a punitive tax regime, but there is nothing in the Bill to rule that out. That is where the fear of the business community lies.
It is not a good enough answer to say that the Government in a Scottish Parliament would not be so unwise as to introduce such taxes. Last July, this Government taxed pensions and, as we saw in last week's Scottish revenue support grant debate, the Secretary of State for Scotland is, Uriah-Heep like, wringing his hands at the consequences of that tax.

Mr. Wallace: The right hon. Gentleman has referred to non-domestic rates, as he did during the referendum. What I have never understood is how they would be any more secure under the current system, whereby Westminster continues to run them—particularly when Labour has a majority of 179 and said in its manifesto that it would return those rates to local government—than they would be if we put in the sort of safeguards that he seeks. In any case, no party in the Scottish Parliament is likely to have an overall majority, so any change to business rates would require considerable consensus throughout the political spectrum.

Mr. Ancram: The hon. and learned Gentleman loves to talk about consensus, but if I were to base my business decisions on the hope that there would be political consensus—or a lack of it, as the case may be—my shareholders might ask whether I was taking those decisions on a correct basis. If we have a doubt, surely it is right that that doubt is answered in this legislation. What is the point of having legislation, which does create limitations and safeguards, if we do not use it to create those necessary areas of confidence?
It is the failure to do that and to rule out vicarious tax raising which has given rise to fears of other taxes. I think it was the president of the Convention of Scottish Local Authorities who proposed a tourist tax. It is hardly surprising, therefore, when people in Scotland, not least those in the tourist industry, sit up. A local sales tax strikes dread into the hearts of retailers and consumers alike, not least in the borders, where people would be most importuned by it.
Whether the Government like it or not, the picture of paying for devolution over and beyond the 3p exists and serves Scotland ill. Our amendments would cure that


simply by ruling those fears out once and for all, and by establishing in statute that, rather than just in the mouth of the Secretary of State and his colleagues, the restriction on the standard income tax rate that was presaged in the White Paper and on which the Scottish people voted is genuine and is in the legislation. The amendments seek to shine light on the darker recesses of this part of the Bill. They are constructive and I commend them to the Committee.

Mr. Tam Dalyell: This is a complex and difficult matter. Like my hon. Friend the Minister, I have served in opposition and, indeed, in government on Finance Bills. I do not make a party point, but if we see in action these very able and clever tax accountants—including my noble Friend Lord Barnett and the Opposition spokesman's colleague Peter Rees, now Lord Rees, a former Member for Dover—one has to ensure that legislation is crystal clear; otherwise, they will run amok and that would be to no one's benefit, including Holyrood.
Therefore, I should like to ask certain questions. What additional taxes can be raised by the Parliament over and above the specified income tax power—I should like the Minister to answer that question in his winding-up speech—particularly where the Treasury restricts the amount of additional revenue that is available to the Scottish Parliament as a result of possible future changes in the United Kingdom tax structure?
I hope that Ministers will take into account what the right hon. Member for Devizes (Mr. Ancram), the Opposition Front-Bench spokesman, said about uncertainty and the lack of clarity, because, bluntly, unless these matters are cleared up before the Bill becomes law, business and individual taxpayers will be condemned to perpetual uncertainty. Nowhere is that more important than in relation to the uniform business rate.
My second question concerns the life companies, where many of my constituents work, as do those of Edinburgh Members. As I understand it, the life companies that pay pensions are in the dark about some of their responsibilities. Are they to make payments and to charge on the basis of a whole year or just time spent in Scotland, and what effect will that have on the Scottish rate? If an English taxpayer moves to Scotland, will the adjustments have to be made by the pension companies and the life offices, or will it be the responsibility of the Inland Revenue?
Under clause 69(3), if a widow received the life rent of her husband's estate, she would not have to pay Scottish tax on the savings income of the trust. However, if that same widow received an annuity from the trust, she would have to pay Scottish tax, would she not? If I am wrong, doubtless I shall be told so; if I am right, is it fair?
5 pm
Again in respect of clause 69, will payments to charity be under a Scottish or a United Kingdom rate? The Bill defines a Scottish taxpayer as someone who, in any tax year, is resident in the United Kingdom, and
Scotland is the part of the United Kingdom with which he has the closest connection".
That description appears in a number of clauses. However, generally speaking, "the closest connection"—[Interruption.] It is no good my hon. Friends getting

impatient. We are dealing with matters of great importance to the lawyers' firms that will have to operate the system. This is the Committee stage of the Bill—[Interruption.] I must tell my hon. Friend the Member for Paisley, North (Mrs. Adams) that if these matters are not clarified there will be endless trouble and difficulties later. It is for the benefit of all of us that they are clarified as soon as possible.
Generally speaking, will "the closest connection" be interpreted as someone who has his principal home in Scotland and spends more of the year in Scotland than elsewhere in the United Kingdom? Will there be separate provision for Members of the Scottish, Westminster and European Parliaments? What will be the status of the time spent at those institutions by Scottish Members? That point should be clarified.
My understanding is that the price of property in Berwick would rise dramatically because people would live on the English side of the border to avoid tax, but work in Scotland. It is said that the Inland Revenue often forces people claiming to be resident outside the UK for tax purposes to produce proof of travel. That would be more difficult if a land border had to be policed. There would be no way properly to monitor the border—we would have to rely on people's integrity. I do not know whether that point is more properly raised under the amendment or on clause stand part, but it certainly arises under clause 69.
Following the introduction of income tax self-assessment, the possibility of tax avoidance by claiming not to be a Scottish resident could affect many tens of thousands of people. A limit on the level of tax would mean that, in practice, there was too little incentive to make avoidance worth while. If the maximum bill was £660, someone would have to be a little penny pinching to object. However, lawyers know that these matters can be cumulative.
The Bill limits the amount of Scottish tax that anyone will pay by confining it to a premium of up to 3p in the pound on only basic rate tax. That means that higher-rate taxpayers will pay only an additional 3 per cent. on income up to the point at which the top rate of tax, 40 per cent., starts to operate. Thus, on current rates, the maximum liability would be £660 a year. Scottish Office calculations show that the average Bill for about two thirds of those expected to be liable would be £230. Does the Scottish Office believe that those figures are roughly accurate?
There are many other things to be said, but, as we are time limited, I shall leave the matter there.

Mr. Wallace: I am sure that you will keep me in order, Mr. Lord. I want to raise points about the details of charges and the definition of "taxpayers", but it may be more appropriate to do so when we reach the amendments dealing with those matters—

Mr. Dalyell: If we ever reach them.

Mr. Wallace: I have just received my timetable; I am sure that the amendments will be reached.
I intend to confine my remarks at this stage to the more political points made by the right hon. Member for Devizes (Mr. Ancram). My Liberal Democrat colleagues and I argued in the Scottish Constitutional Convention for


tax-varying powers—and they were agreed to as part of the convention's package. We thought it to be a very important issue. It is one of the more significant changes from the 1979 referendum and the 1978 legislation.
It is interesting to recall that one of the criticisms made by the Conservative party in 1978–79 was that a Scottish Parliament would not have tax-varying powers and therefore would be a toothless tiger and unaccountable. When we tried to address that problem, the Conservative party changed its tune and raised all sorts of fears and scares. The right hon. Member for Devizes said that it is the Government's duty to dispel all the myths and scares, but it was his colleagues—more than any others—who went around Scotland stirring them up in the first place.
The hon. Member for Linlithgow (Mr. Dalyell) accurately pointed out that the 3p variation would apply only to the basic rate tax band. Some people put it about that it would apply to all income—so that if someone were earning £200,000 a year, the variation would apply to all of that £200,000. Some amazing figures were produced on that basis.
It is fundamental that the Scottish Parliament should have a tax-varying power. After all, taxation makes an elected body accountable to its electorate. The fear—which was actually well expressed by some Conservatives at the last referendum—is that, if there is not some scope for tax variation, every time a project is frustrated—be it a hospital, school or pedestrian crossing—people will blame Westminster for not allowing us more money. That would then fuel friction.
In fact, the Scottish Parliament will have a tax-varying power. If it chooses not to exercise it, it will be as answerable to its electorate as it will be if it chooses to exercise it at the rate of 1p, 2p or 3p. That is why it is as much an issue of democracy as it is of taxation.
The right hon. Member for Devizes has tabled many amendments to add the word, "income", but when I challenged him he was unable to name one other tax that could fall within the definition of this part of the Bill—

Mr. Ancram: rose—

Mr. Wallace: If the right hon. Gentleman has found one in the meantime, I shall happily give way.

Mr. Ancram: I want to ask the hon. and learned Gentleman a question, as he asked one of me. If the tax-varying power is restricted to 3p, and if the tax base does not achieve the necessary £450 million, where will the Government find the extra tax?

Mr. Wallace: We shall deal with that question when we come to the appropriate part of the Bill. I have never understood the position to be anything other than using the income tax mechanism. When we have all had an opportunity to read the consultation document that has been placed in the Library, more light may be shed on the matter. It has never been claimed that anything other than the income tax mechanism would be used.
We heard again today that the great danger of having a separate rate for Scotland, which would lead to great differences between Scotland and England, would be that people flocked across the border to set up home in England. If the relative rate of taxation were so vital in choosing where to live or work, why do not people flock to Shetland,

which has the lowest council tax in Scotland? [Interruption.] I accept that there are many reasons why people choose a particular place to live or to locate a business.
The Conservative Government introduced banding in council tax. In 1996—the latest year for which I have figures—the occupant of a £85,000 house in Scotland would have paid, on average, £8 a week more than the occupant of a similarly valued house in England. I have looked at the relative differences between Dumfries and Galloway, and Cumbria. The occupant of a £50,000 house in Dumfries pays substantially more council tax than the occupant of a similarly valued house only 30 miles away in Carlisle, yet we have not seen removal vans trundling across the border because people want to relocate. There is more behind people's decisions on where to live than the myths and scares that we have heard from the Conservatives during the referendum campaign and since.

Mr. John Home Robertson: rose—

Mr. Wallace: I shall give way to the hon. Gentleman, who has a constituency near the border.

Mr. Home Robertson: My constituency is not near the border, but my home is. I confirm that there is no sign of people flocking across the border. The good citizens of the Scottish Borders region voted both for the establishment of a Scottish Parliament and—along with almost every other region of Scotland—for the tax-varying powers. I do not understand what the fuss is about.

Mr. Wallace: I agree with the hon. Gentleman. The islands area of my home and the region of my birth were the two places that did not vote for the tax-varying powers, but, considering the negative approach to the Scottish Parliament in 1979, which was our starting point, we were not far away. All Members of the Scottish Parliament will have to exercise those powers sensitively, if they exercise them at all. The no vote to tax-varying powers in some areas and the fact that the yes vote was only marginally over 50 per cent. in some others should remind Scottish parliamentarians that the powers should be used sensitively.
The powers in the Bill do not justify the scares that we have heard today. If businesses are confused, the fault cannot lie with those of us who have been arguing the case for those powers since the Scottish Constitutional Convention reached its agreement in November 1995. The Conservatives are seeking to create further confusion today. If these unnecessary amendments are defeated or withdrawn, no doubt they will conjure up other mythical creatures that are about to do down the Scottish business community. That is not the intention of those of us who agreed the powers in the convention. The most important point is that we want the Scottish Parliament to work. We want Scotland to prosper and flourish. No one wants to put unnecessary blocks in the way of prosperity in Scotland.

Mr. Ancram: Why is the hon. and learned Gentleman not prepared to accept our amendments, which would merely put the word "income" in front of the word "tax"? That is apparently what he wants.

Mr. Wallace: Because they are superfluous and are designed to make a political point, continuing the case that the right hon. Gentleman and his hon. Friends lost so decisively on 11 September.

Mr. Swinney: The Government have got themselves into difficulties over the technicalities of the tax-varying powers. I have already referred to the difficulties over the availability of the consultation paper on aspects of the tax-varying powers. I was intrigued by the Government's press statement on that. It said that the Government were publishing the technical paper
to inform taxpayers of the Government's intention, to assist Parliament as it continues its scrutiny of the Scotland Bill and to seek views from those with an interest in the operation of the new tax system on how detailed aspects of the new arrangement might best be handled.
It is strange that the Government publish a document
to assist Parliament as it continues its scrutiny of the Scotland Bill
on the day that we are considering the relevant amendments. None of us has had a chance to read the document. My hon. Friend the Member for Banff and Buchan (Mr. Salmond) went to the Library earlier this afternoon to obtain a copy, at the Minister's suggestion. A bewildered librarian tried to find the paper. Two copies were found, both of which had been sent to the Library for information and reference only. It is unsatisfactory that the Government's announcement has put such a question mark over the tax-varying powers.
I have tabled amendments to clause 71 on the definition of Scottish taxpayers. When I came to London this morning, I was excited by one newspaper comment, which I thought showed a great reflection by the Government on some of the aspects of the proposals before us. The Daily Mail said:
The Government appeared to bow to ferocious criticism of its tartan tax plans last night by saying that it would be willing to rethink certain key areas.
None of us expected such a rethink to be tabled in the House of Commons Library this afternoon.
Talk of movement on such issues is welcome. I hope that the Minister will have something positive to say about the substantial issues that we have raised on clause 71. However, I do not want to talk about those amendments yet. I want to concentrate on the proposals of the right hon. Member for Devizes (Mr. Ancram). I shall not be surprised if the Minister is not positive about those amendments. I suspect from his body language that he will not be. The Secretary of State may have had the right hon. Member for Devizes in his sights when he made his speech about destabilisation on Saturday evening. The further litany of scaremongering that the right hon. Member for Devizes has put forward, to compound what he said during the referendum campaign, will probably destabilise the Scottish Parliament and the parliamentary passage of the Bill more than anything else.
The evidence of the debate so far is that the Tories have failed to learn the lessons of the general election or the referendum. The people of Scotland gave clear assent to the tax-varying powers. It is incumbent on us to reflect the views expressed in that referendum. That does not prevent us from bringing forward constructive amendments designed to help the passage of the Bill and enhance the clarity of its details. That is what we want to do in clause 71.

Dr. Liam Fox: Does the hon. Gentleman agree that, if the practical effect of the Bill, particularly the contradictions inherent between clause 69 and subsequent clauses, resulted in an increase of more than 3p in the basic rate, the Scottish voters would feel that they had been conned in the referendum?

Mr. Swinney: My reading of clause 69 is that the Parliament will have the power to vary tax by 3p. If that does not add up to £450 million—I suspect that that is what the hon. Gentleman is getting at—it will be tough on the Scottish Parliament. The Government tried to produce an illustrative figure in the White Paper of what the tax might raise. That is for the Government to answer, not me. I have enough numbers to defend without defending the Government's.
The official Opposition cannot grasp two main points. First, the power to raise at least part of its finances is a basic requirement of any Parliament. Secondly, the people of Scotland still have discretion on how the powers should be used. The referendum was a vote not to put up taxes but to give the Parliament the power to put up taxes or reduce them. If the careful-budgeting, money-conscious Conservative party is about to re-emerge in Scotland, able to exercise financial prudence, as it did when doubling the national debt in the past few years, we shall be intrigued to discover what it will offer the Scottish people in a general election. The people of Scotland have a choice on whether the powers are exercised.

Dr. Fox: The hon. Gentleman says that if the 3p does not raise £450 million, it is tough for the Scottish Parliament. The White Paper explicitly says:
the Parliament's ability to raise or forgo up to £450 million through the tax system will be preserved. This sum will be index linked to maintain its real value.

Mr. Swinney: The Government can reconcile their calculations between 3p in the pound and £450 million. My reading of the clause is that the Parliament will have the right to vary the basic rate of income tax by 3p in the pound. That is for the Government to defend.
The Committee will not be surprised to hear that, unlike the Conservatives, I believe that the Scottish Parliament should have wider tax-varying powers. Quebec and the Spanish autonomous regions have far more extensive tax powers which can be used not only to raise a few million pounds here and there but fundamentally to alter the economies of those areas. The Quebec and Catalonia Parliaments can raise around 40 per cent. of their finance. By contrast, Scottish local government can raise a mere 15 per cent. of its own finance. The Scottish Parliament is being given the opportunity separately to raise about 3 per cent. of its taxation and, in the context of the examples that I have just cited, the powers being suggested by the Government are very restrictive.
The Tories are keen to restrict the tax role of the Parliament. I certainly have problems with the extent of its tax powers, because they do not give the Parliament the opportunity to take some of the more imaginative decisions that would be required to improve the Scottish economy and deliver a fair tax system that is more in the interests of the people of Scotland. Nor will the powers generate much flexibility. Some of the interesting examples of varying


taxation, whether in the form of lower business rates, tax incentives for entrepreneurs, tax breaks for those on low incomes or adjustments in allowances to protect people who are persistently hammered by the tax system in this country, are all opportunities that are lost by the limited nature of the powers. Therefore, the Conservatives are making a mountain out of a molehill in relation as to the substance and significance of the powers.
The tone of the Conservatives' amendments is that the Parliament's powers should be fixed in stone. They are very limiting and Westminster-focused amendments, which will simply entrench some of the rhetoric that we have heard all too often from the Conservatives. They put Scotland second and demonstrate beyond doubt that the Tories do not trust the people of Scotland to be imaginative and responsible in the use of those powers. There is a democratic issue at stake—if the people of Scotland wish to use the powers, they will vote for those who are prepared to use them. A separate election contest will determine that point.
Clearly, the Government are going to defend staunchly the 3p in the pound power. I have mentioned some of the limitations, but another that I find quite frustrating is that the power will have a disproportionate effect on middle-income earners. For someone earning about £19,000, the application of the full 3p in the pound increase will account for about 10 per cent. of his tax bill. For someone earning £100,000, it will account for only 2 per cent. of his tax bill. Again, middle-income earners will be disproportionately hit by potential tax increases while people earning a phenomenal sum of money will benefit from a tax system that has lost its progression and equity.
If the Government were to surprise us all later tonight by saying that part of the current consultation exercise is a proposal to give the Parliament the power to abolish the ceiling on employees' national insurance contributions, I should not be able to get into the Lobby fast enough. It would bring some equity back into the tax system, but I suspect that I am allowing my optimism to run away with me.
The Scottish National party has argued for fiscal autonomy, for the Parliament to have more responsibility for its financing, but the Committee rejected our arguments at an earlier stage. Given that the Government now have some doubts about the application of the tax-varying powers, and that what looks like a hurried consultation paper has been typed up in the past few days to be issued in advance of this debate, I think that we shall have to return to those arguments on Report because some of the substance of the powers and the details of the financing of the Parliament are clearly not as securely founded as we should have liked. My colleagues and I shall examine the details of the tax powers extremely carefully to ensure that some of our arguments on fiscal autonomy are redeployed on Report.

Mr. Hawkins: I shall be brief, but I wish first to take up one point made by the hon. Member for North Tayside (Mr. Swinney)—the extraordinary situation in which we have found ourselves this afternoon.
A paper has been rushed out, but hon. Members have not had access to it. The Minister for Home Affairs and Devolution has been good enough to apologise to hon. Members, so I shall not blame him personally, but this is yet another example of a certain combination that we have witnessed all too often from Government Departments—

the combination of arrogance and incompetence. Arrogance leads to paperwork appearing only on the day of the debate to which it is relevant, so that we do not have the opportunity to study it, and incompetence leads to it not being available in the Library when the Minister thinks that it is. Hon. Members are having to rush out of a debate on taxation matters, which are of great interest to the Scottish people. I hope that the Minister will give us an undertaking that we shall never again have to put up with official Government papers coming out on the very afternoon of the debate. It is simply not good enough.
The debate began with the Minister, and, indeed, the hon. and learned Member for Orkney and Shetland (Mr. Wallace), suggesting that there is nothing to worry about, and that the Conservatives' amendments are not necessary. However, we have just heard about the Scottish National party's plans from the hon. Member for North Tayside. He said that it has always been the SNP's position that, the minute that it had the chance to change things, it would rather have much wider powers to vary taxes. That is precisely what the Conservative party and many Scottish people are worried about.
In May last year, Sir Donald Pattullo, Governor of the Bank of Scotland, was expressing concern—

Mr. Swinney: On a point of information, the gentleman is in fact Sir Bruce Pattullo.

Mr. Hawkins: Of course, I meant Sir Bruce Pattullo. The concern that he was raising about the possible need for a sales tax, and the plans of the Convention of Scottish Local Authorities for a tourist tax, which is of great concern to the people in the tourism industry with whom I have worked over the years, are signs of why we are rightly suspicious about the fact that this part of the Bill is entitled not "The Income Tax-Varying Power" but simply "The Tax-Varying Power".
The hon. and learned Member for Orkney and Shetland suggested that there was something inconsistent in the tabling of our amendments today by my right hon. Friend the Member for Devizes (Mr. Ancram) and our original opposition to tax-varying powers, but that is not the case. There is no inconsistency. We were against the Scottish Parliament having tax-varying powers; now that it is to be given those powers, we want them to be as limited as possible, and we want them clarified.

Sir Robert Smith: My hon. and learned Friend the Member for Orkney and Shetland (Mr. Wallace) also said that the inconsistency went back to the Conservatives' previous incarnation, when they were extremely critical of another Bill relating to Scotland for providing no tax-varying powers.

Mr. Hawkins: The hon. Gentleman is right—the hon. and learned Member for Orkney and Shetland made that point as well, but he also said specifically that there was some inconsistency in our opposition to tax-varying powers in the referendum campaign and our amendments today. My point is that our position has been entirely consistent.
We want to ensure that the powers are as limited as possible. I am sure that that is what the Scottish people want, too. They do not want a Pandora's box open for future


development by people such as the hon. Member for North Tayside and his colleagues. We want to ensure that the powers clearly relate only to income tax.

Mr. John McAllion: Will the hon. Gentleman concede that, if the hon. Member for North Tayside (Mr. Swinney) and his colleagues were in a position to influence matters on their own, Scotland would at that stage be independent, so his argument would be redundant?

Mr. Hawkins: The hon. Gentleman is right to draw attention to the fact that our concern about the Bill and the whole process is that the Government are leading us down the slippery slope towards complete independence and the break-up of the United Kingdom. That is my party's fundamental objection to what the Government are doing. Our amendments draw attention to the vagueness of the Bill. There are great dangers unless the amendments, which limit and clarify the powers, are accepted.
I want to draw the Committee's attention to some of the concerns about the tax proposals that were outlined in an article in The Independent on 8 January last year. The particularly appropriate headline, in the context of this debate, was "Tax Shocks for Jocks". The article highlighted the comparisons that the Labour party was then seeking to make, and the fact that it was saying that there was nothing to worry about, that there could be differential rates of tax between Scotland and England and that it would be just like the United States. The article also pointed out:
The new Labour Scottish tax would be working against the framework of there being a tax haven next door.
Accountants, business men and the Governor of the Bank of Scotland have expressed concern about the plans of the Scottish National party and the Labour-dominated Convention of Scottish Local Authorities. Unless the Government accept the Conservative amendments, there will be no clarity at all.

Mrs. Eleanor Laing: Why are the Government afraid to accept our perfectly reasonable amendments that would insert the word "income" in front of the word "tax" at various points in the Bill? If, as the Government have consistently said, they have no intention of varying any other tax, what is wrong with accepting the amendments? They would add only clarity to the Bill. They would not take anything away from the Bill. If it is truly the Government's intention that only income tax would be affected—as they said in the White Paper and told the Scottish people before the referendum—why do they oppose the amendments?
Is it not time that the Scottish people knew with clarity what they voted for in the referendum? I shall continue to argue that it is a pity that they did not know before the referendum, but at least they should know before the legislation comes into force—if indeed it does. As the amendments are purely for the sake of clarity, who could possibly object to them on any reasonable grounds?
As the Government and hon. Members on my left representing the Liberal Democrats and the Scottish National party—[Interruption.] They are certainly on my left.

Mr. Swinney: We are pleased about that.

Mrs. Laing: I am pleased, too, because I am on their right. Some of us are Scottish Tories, and always will be.
Liberal Democrat and SNP Members frequently insist that it is important that the new Scottish Parliament should have autonomy and that it is vital that the Westminster Parliament trusts the Scottish Parliament and does not treat it like a child and restrict it too much. Hon. Members are always saying that trust is of the essence in setting up the new Scottish Parliament. If that is indeed the case and the Government believe in the autonomy of the Scottish Parliament, it is inconsistent to argue that any tax-varying powers should be limited to 3 per cent. Why should it be 3 per cent.—why not 2.5, 3.5, or 4.25 per cent.? We have never had a proper explanation of why the Scottish Parliament, as an autonomous body, should have its tax-raising powers limited to exactly 3 per cent.

Mr. Andrew Welsh: Local authorities have 15 per cent. revenue-raising powers, yet the Scottish Parliament is to be given only 3 per cent. revenue-raising powers. What kind of Parliament has fewer revenue-raising powers than a Scottish local council? The Tories have just apologised for what they did to Scottish local government. Should not the hon. Lady be apologising in advance for what she is doing to the Scottish Parliament?

Mrs. Laing: It is not what I am doing; it is what the Scottish people voted for in the referendum. The hon. Gentleman is right to point out that local authorities have more autonomy in respect of raising and varying tax than the Parliament will have. So where is the trust? I put it to the Committee that the reason for inserting the figure of 3 per cent. is that it is a wolf in sheep's clothing. It was done simply to make sure that the Scottish people were not frightened.

Mr. McAllion: Thank God for that. I was beginning to worry about the powers of the Scottish Parliament.

Mrs. Laing: I know that the hon. Gentleman is worried about the powers of the Scottish Parliament and that he and many of the hon. Members on my left would like the Scottish Parliament to have far more powers.

The Temporary Chairman (Mr. John Maxton): Order. The hon. Lady is going rather wide of the subject. I wish that she would return to the amendment.

Mrs. Laing: I apologise, Mr. Maxton. It is too much of a temptation to reply to the hon. Member for Dundee, East (Mr. McAllion).
If the Westminster Parliament truly trusts the body that is being set up in Edinburgh, why is it not willing to give it more autonomy in its tax-raising powers and to accept the amendment, which would simply provide clarity? Whatever other havoc is caused when the Parliament is set up in Edinburgh and whatever uncertainty is created, especially for small businesses in Scotland, at least the


Scottish people will know that only income tax can be varied. If it is truly the Government's intention to allow only income tax to be varied, why can they not accept our very reasonable amendments? The hon. Member for North Tayside (Mr. Swinney) said earlier, in respect of the level of taxes that can be raised, that, if certain things did not happen, it would be tough on the Scottish Parliament. It would not be tough on the Scottish Parliament; it would be tough on the Scottish people.

Mr. David Prior: I have read clause 69 very carefully in conjunction with clause 72 and I agree with my right hon. Friend the Member for Devizes (Mr. Ancram): it is extremely confused. However many times I read it, it became no clearer. My right hon. Friend described it as obscure and incomprehensible. The fact that it is incomprehensible and the Government do not seem to want to clarify it creates doubt, uncertainty and a suspicion that there may be some hidden taxes lurking beneath the surface—not least because the basic rate of 3p in the pound, to which the tax is supposed to be limited, does not seem to fit with the £450 million that they talk about raising from it.
Clause 69 is obscure, but it is nothing compared with clause 72, and the two together cause doubt and confusion among Opposition Members. It is important that clause 69 should be clear and certain for three particular reasons. First, despite what was said earlier, taxation is extremely important when it comes to locating and running businesses. Parts of the world that have low taxation are doing well. If hon. Members are in any doubt about that, they should ask Sir Bruce Pattullo, Governor of the Bank of Scotland.
Secondly, the tax-raising power in Scotland drives a significant wedge between the various parts of the United Kingdom. Why should Scotland be able to raise or lower income tax when other parts of the United Kingdom cannot? It is therefore doubly important that we know the exact extent of the tax-raising powers.

Mr. Swinney: The hon. Gentleman is in effect arguing that all taxes should be the same throughout the United Kingdom. Can he tell me why council tax for the average household is about £200 in the City of Westminster, but may be five times as much in Scotland?

Mr. Prior: I am arguing not that taxes should be the same throughout the United Kingdom, but that taxation should not be structured in such a way as to break up the United Kingdom. Local government is correctly financed through locally raised taxes—indeed, I wish that it was financed to a greater extent through locally raised taxes.
The third reason we need clarity and certainty in clause 69 is illustrated by the argument advanced by the hon. Member for North Tayside (Mr. Swinney), in that his party wishes to extend the right of the Scottish Parliament to tax and will use every chance available and every piece of ambiguity and uncertainty in the clause to argue for higher and greater tax-raising powers. Our amendments would clarify the Bill; they would not make any fundamental changes, but they would add certainty. That is why I support them.

Mr. Tim Collins: The amendments invite the Committee to consider the

important provision that gives the Scottish Parliament the power to vary income tax up or down. I shall follow up my right hon. and hon. Friends' remarks about the lack of clarity in the Bill later. First, I should like to pick up on some of the remarks made by the hon. and learned Member for Orkney and Shetland (Mr. Wallace).
The hon. and learned Gentleman said that our amendments should not be accepted because, in his view, they are superfluous. If the worst that can be said of the amendments is that they merely clarify or lengthen the Bill, that is not a sufficient argument for striking them out, given the importance of clarity in this matter.
Secondly, the hon. and learned Gentleman said that the Conservative party has no right to table the amendments because they express a position different from that taken by the Conservative party in 1978–79. That seems a rather strange view from the spokesman for a party which, since 1978–79, has changed its view on the right to buy, nuclear weapons and privatisation or nationalisation and which has allied itself, merged itself, split itself and changed its name countless times. An argument based on consistency with 1978–79 comes ill from a Liberal Democrat.
Thirdly, the hon. and learned Gentleman pooh-poohed the proposition that anyone would ever move from Scotland to Cumbria. Although I understand and respect his natural love for his country—Scotland is a beautiful country—as one who represents a Cumbrian constituency I have to tell him that there are people in my constituency who have moved there from Scotland. They have moved both themselves and their businesses and one of the many factors they took into account was the difference in taxation, which the hon. and learned Gentleman said was irrelevant and not a matter of concern.

Ms Roseanna Cunningham: Name them.

Mr. Collins: I name Mr. Melvin Mackie, who is the entirely splendid landlord of The Pheasant Inn in my constituency and who moved from Scotland to Cumbria. I thank the hon. Lady for that invitation to name and praise that splendid gentleman and his splendid pub.

Mr. Russell Brown: I live on the border and I can assure the hon. Gentleman that everything he is arguing was argued before 1 May. Scotland's businesses are not flocking to relocate across the border. Relocation is far too expensive: the hon. Gentleman should know that.

Mr. Collins: I hear what the hon. Gentleman says, but we do not yet have a Scottish Parliament—or differing levels of income tax, which is what the Bill is all about. We shall see what happens. I was invited to give an example of someone who has moved from Scotland to Cumbria and I have done so, so I have proved my point.
Scottish National party Members have said that they think the problem with the tax provision is that 3 per cent. is not enough and that the figure should be far higher. The 15 per cent. for local authority financing was quoted—and that was clearly the opening bid in an upward process. That proposition is difficult to reconcile with the argument of the hon. and learned Member for Orkney and Shetland, who said that because Members of the Scottish Parliament will be elected by proportional representation a cross-party consensus will be needed before there can be any tax increases, so no one needs to worry.
Which parties will apply the brake to ambitions to shove up taxes harboured by a Labour party short of a majority in the Scottish Parliament? First, there will be the Liberal Democrats, whose constant refrain at Prime Minister's questions is to ask why he will not shove up taxes more, so as to be able to spend more public money. Secondly, there will be the Scottish National party, which says its only problem with the tax-raising powers of the Scottish Parliament is that they do not go far enough and do not enable taxes in Scotland to rise yet further. It seems unlikely that the Scottish Parliament will apply a brake to any of Labour's ambitions to raise taxes. It is clear that, unless there is a clear and overwhelming Conservative majority—as we hope there will be, although it will be difficult to achieve under a system of proportional representation—all the other parties will be instinctive tax-raising parties which, sooner or later, will try to use the powers to increase taxes to the detriment of the Scottish people.
The point of the amendments is simply to establish what was put before the Scottish people in the referendum.

Mr. Swinney: Does the hon. Gentleman accept that if, in a Scottish general election, the people of Scotland were given a clear choice between the different tax proposals offered by the parties and they opted for certain proposals that might, lead to an increase in taxation, that would be the expressed will of the Scottish people and that they are entitled to express that opinion democratically?

Mr. Collins: The interesting question is whether those propositions would be honestly put to the Scottish people. It is significant that the Government have established a pattern whereby they ask people to look at the rabbit of income tax while they do all sorts of other things in the background. Some of us remember that, before the general election, the present Prime Minister went around signing posters in his own fair hand saying that he would not put up income tax. As I found on doorsteps in my constituency and elsewhere, many people interpreted that as a pledge not to put up taxes at all, but, as we have already seen, taxes were increased in the first Budget of the Labour Administration and it is threatened that they will rise extensively.
It is likely that the same will happen in Scotland: there will be an attempt to focus all attention on income tax, as though that is the only tax that can be levied. We should ensure that what the Scottish people were asked to vote on in the referendum—that a Scottish Parliament should have the power to vary only income tax rates, and that by a limited amount—should be written on the face of the Bill. Without that and the amendments, the technique constantly used by the Government—inviting people to focus solely on income tax, thus enabling the Government to make all sorts of other tax increases that they believe have a lower profile but which are every bit as painful—will be used again.
The amendments are important because they provide clarity and would establish on the face of the Bill the proposition that the Scottish people were invited to endorse. They would prevent a sneaky, but particularly

poignant and oft-repeated, trick of the current Administration that has already been played on the people of the United Kingdom as a whole being perpetrated on the Scottish people.

Mr. Robert Syms: I support the amendments, which would insert the word "income". It was explicit throughout the White Paper, the referendum and the debate on devolution that what the amendments would write into the Bill was what was intended and I cannot understand why the Government do not accept them—after all, they are in the spirit of the debate. The amendments would clarify and make more specific the powers of the Parliament. There will always be those who worry that, if income tax is not specified, other taxes may appear. In the press, we have read of concerns about a tourist tax or a sales tax, and various members of the Scottish business establishment are concerned about how other forms of taxation may impact on them.
Having read the press release and the various prospective clauses that were put in the Library earlier, I am pleased to see that the Government have clarified many points. The complexity of the income tax system becomes clear when one starts to read through those complicated documents. It is easy to see why tax lawyers make such a good living at the Bar when they deal with issues relating to income tax.
I doubt whether a 3p rise would raise £450 million. That may be an issue for another day. I oppose the principle of varying tax within the United Kingdom because I believe that it will be detrimental to Scotland. Scotland may wish to make that choice, but the debate about crossing borders shows that it will be a difficult issue. As the hon. Member for Dumfries (Mr. Brown) told my hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins), companies will not move from Scotland, but the decisions of many international businesses and businesses based throughout the United Kingdom about where to expand could be determined by tax structures.
The Library document brings out the issue of the setting-up costs of the Scottish Parliament that will fall on the Inland Revenue and social services. For the Inland Revenue, a setting-up cost of £10 million, with perhaps £8 million a year running costs, was mentioned. For social security, the figures are £6 million setting-up costs and perhaps £1 million running costs. It is inevitable that a Parliament with the power to levy ½p or 1p will not choose the lower figure because of the substantial setting-up and initial running costs.
With a £16 million setting-up cost and a £9 million running cost, the Parliament will not go for a ½p rate, which may raise only £75 million. That would not be efficient. In practice, the Parliament will not have much choice between ½p, 1p or 3p because, with the cost of collecting the tax, it will go for the top level from day one. That will affect business and employment north of the border.

Mr. Welsh: While raising the spectre of international companies rushing to leave Scotland or not coming at all, can the hon. Gentleman give an example of companies


being deterred? To prove his point, the hon. Member for Westmorland and Lonsdale (Mr. Collins) could offer only a publican rushing from Scotland to Cumbria.

Mr. Syms: It would take a while; the Parliament has not yet been set up and the tax has not yet been levied.

Mr. Swinney: Assuming that it will be.

Mr. Syms: It is a realistic point. High-tax countries do not attract jobs. Scotland will be competing against England and Wales, which will have lower taxes.

Sir Robert Smith: I cannot understand why Conservative Members do not understand the logic. The matter would be dealt with as an issue in the election to the Scottish Parliament. The hon. Gentleman said that the Parliament would have to raise the tax by 3p, but it could get away with that only if the electorate was willing to forgive it.

Mr. Syms: The hon. Gentleman makes a good point. I am sure that that will be a key issue. The principal point of the amendments is to insert the word "income" to make the provision specific. I do not believe that that would change the Government's intent, but it would reassure many people who are worried that other forms of taxation might be raised. I support the amendment.

Mr. Gerald Howarth: This is an important debate. It is a great shame that there are so few members of the media in the Gallery to listen to a debate that has profound implications for all the people of the United Kingdom and not only for the people of Scotland.
I support the amendments tabled by my right hon. Friend the Member for Devizes (Mr. Ancram) to insert the word "income" so that there is no doubt, not only in the House but in the country at large, that we are talking about powers to vary income tax, not powers that relate to any other form of taxation.
If the hon. and learned Member for Orkney and Shetland (Mr. Wallace) believes that the word "income" is superfluous, let him put it in the Bill. It is not as if we are asking for a series of new clauses that make lengthy insertions. We propose a one-word insertion at a number of points that would mean that no one, least of all the courts—to whom the Government are handing more powers under the Human Rights Bill, which we debated last week—should be able to interpret the will of Parliament as extending beyond income tax to other forms of taxation.
I remind the Minister for Home Affairs and Devolution that, on Second Reading, the Secretary of State referred to safeguards that had been built into the system and said:
First, income from savings and dividends will not be affected by the tax-varying powers. We were influenced heavily in reaching that decision by the need to have a level playing field for the financial services industry in Scotland, which is particularly important in insurance and pensions."—[Official Report, 31 July 1997; Vol. 299, c. 465.]
I wonder how much those industries gave to the Labour party. Bernie Ecclestone gave £1 million to secure changes in the tobacco regime. The Government have

clearly had representations from the insurance and financial sector, which is concerned about the impact on its businesses.

Mr. McLeish: On a point of order, Mr. Maxton. The comments that my right hon. Friend the Secretary of State made on Second Reading have been linked to the suggestion that the Labour party may have received income from financial services companies. I hope that that was not the inference that was being drawn.

The Temporary Chairman: That is not a point of order but a matter for debate.

Mr. Howarth: I note your ruling that that was not a point of order, Mr. Maxton. The Minister is a decent chap, but he was remarkably sensitive to my point. Perhaps he might like to check with Walworth road to make sure.
The point that I was making for the benefit of the Minister and in answer to the Scottish nationalist lot was about a specific case of an industry that has made representations to the Government about the potential impact of the Bill on its business. The industry wanted to ensure that it would not be prejudiced by an extension of tax-raising powers beyond income tax. If the Minister wishes to score a few brownie points with the insurance and financial services industry, which plays a big part in the Scottish economy, he should accede to our small but important amendment.

Mr. Oliver Heald: Has my hon. Friend noticed that the largesse directed to savings is not being directed towards charitable gifts, in respect of which the amount of Scottish tax supplement will not be grossed up in the usual way? It will be restricted to only the United Kingdom basic rate. Is that not a particularly mean decision?

Mr. Howarth: I was not aware of that and I am grateful to my hon. Friend for drawing it to our attention. It seems that it is a one-way ratchet—and not a good example of the good faith to which the people of Scotland might like to look forward in their dealings with a Scottish Parliament.

The Temporary Chairman: Order. The hon. Gentleman is straying a little far from the amendment. I would be grateful if he returned to it.

Mr. Howarth: I was seeking only to respond to my hon. Friend's intervention.
As a matter of principle, I believe that national taxation should be decided by this place for the whole United Kingdom. This part of the Bill is one of the axes falling on the unity of the United Kingdom. I agree with my hon. Friend the Member for Poole (Mr. Syms) that it is a matter of principle that taxation should be determined nationally in this Parliament at Westminster.
There has been some discussion of people moving. I noted the nervousness of the insurance and financial services industry about the Bill's impact on their business. Much mirth was had by the Scottish nationalist lot about the suggestion that my hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins) could not name people who had moved to Westmorland. They ought to


take note of the fact that, even in advance of the Bill reaching the statute book, a Scottish business man has realised that he can read the runes only too clearly and has decided to up sticks in order to ensure that there is no way that he can be affected. I am quite sure that the habitues of his hostelry will be grateful for his move.

Mr. Wallace: Will the hon. Gentleman inform the House how many international companies have announced over the six months since the referendum that they are about to make inward investment in Scotland?

Mr. Howarth: I am not aware of the answer off the top of my head. The hon. and learned Gentleman makes a fair point. Many businesses have gone to Scotland. That is one of the features of 18 years of a Conservative Government. Thanks to our policies—

The Temporary Chairman: Order. The amendment says: "after 'the', insert 'Income'." I wish that the hon. Member would refer to it.

6 pm

Mr. Howarth: I was, Mr. Maxton. I was referring to income—income in Scotland from all the new businesses that were encouraged by the Conservative Government.
I say to those who have questioned whether the Bill will have an impact on where business locates that, generally, business does not make a decision until it has seen how individual bits of legislation take effect. In that respect, it is very instructive to look at what is going on in Kent, where people have been able to see the impact of different rates of taxation. There, they have voted with their feet—

Mr. Frank Roy: They voted Labour.

Mr. Howarth: If the hon. Gentleman thinks that this matter is anything to do with there being a Labour Government, I remind him that it probably has more to do with the Labour Government sticking to the spending limits set by the previous Conservative Government, giving people some reassurance. Once the Bill comes into effect, we are likely to see businesses trying to escape the extra burdens of a Scottish income tax. Scottish nationalists say that it will not make a difference.
In the White Paper, the Government made clear that they
propose that the tax varying power should operate on income tax, because it is broadly based and easy to administer.
I shall return to that point. They specifically ruled out VAT, stating:
different rates of VAT on different sides of the border would cause practical problems".
I remind the Minister that the 1977 White Paper came to a very different conclusion. It noted that, of all the options, supplementary income tax
seems an attractive candidate at first sight because of its high yield and broad coverage
but it was ruled out primarily on the ground that it
would impose a heavy new burden on the PAYE system and would reduce its efficiency as the Government's main revenue collector. Furthermore, because a marginal tax would be at a low rate, the cost of collection could represent as much as 20 per cent. of the yield.

There we have it. It has been considered in the past that such a tax would impose a substantial burden. The Government are now asserting to the contrary.
There will be a cost to business from the tax-varying powers conferred by the clause. There will be a cost to the Government. We do not know how much; the Bill is not explicit on that. I wonder how much the Government will make available to businesses to help them offset the additional cost of the income tax-varying powers that they are being asked to shoulder.

Mr. Syms: Is my hon. Friend aware that, from some estimates, it could cost business upwards of £50 million to set up the running of the additional tax?

Mr. Howarth: That is a very substantial amount of money—but cost is not the only issue. For a large business, £1 million may not be a large amount, but £10,000 in costs could be a substantial burden on a very small business. My hon. Friend mentions a substantial figure, which could fall disproportionately and particularly harm small businesses.
I give the Minister a word of advice. All Conservative Members are clear that much of the Bill comes from a dispute between the Scottish nationalists and the Labour party, as they vie to outdo each other on winning the nationalist vote. The Minister had better beware, because it is perfectly apparent—we shall come to this issue in a later debate—that the 3p income tax-varying power may not raise enough for the Scottish nationalists' designs, and they will be back.
I say to you, Mr. Maxton, as a Scottish Member, that the Scottish nationalists will be back, seeking to persuade the Scottish people that such a sum is paltry and that the only way in which they can implement their plans will be with a very much larger take. I support the amendment.

Mr. McLeish: Some things change, but many do not. The speech of the hon. Member for Aldershot (Mr. Howarth) was breathtaking in its irrelevance to the fact that Scotland has moved on, the business community has moved on and the Scottish Conservative party has moved on. Conservatives in this House have simply not moved on.
Before I briefly address the Opposition amendments, I shall refer to the consultation paper issued by the Inland Revenue. The paper sets out the Revenue's initial thinking on a range of second-order technical issues, which will have to be dealt with before April 2000. It has been sent to a range of representative organisations and invites their comments. It is very much a working document, but, for hon. Members' information, the Chief Secretary to the Treasury and I have arranged for copies to be placed in the Library. I shall come to points made about that in a second. The paper is intended only as a step along the road to sorting out all the various detailed technical aspects of the tax. I anticipate, however, that it will meet some of the concerns that have been expressed to us and will encourage constructive comment in other areas.
May I repeat that I apologise for the inconvenience that has been caused to hon. Members? The paper is part of the on-going debate, but it would have been courteous to


have informed at least the party leaders about its availability. It could then have been accessed a little earlier. On that basis, I hope that I can leave that point.

Mr. Ancram: I am grateful to the Minister for his apology, which I certainly accept. Will he pay the fees of the tax adviser whom I shall need to explain the paper to me?

Mr. McLeish: As they say in the legal profession, I shall reflect on that matter.

Mr. Wallace: I, too, am grateful to the Minister for his apology. On a cursory glance at the paper, one of the things that cause me some concern is a reference to clause 75 and how many of the responses to the consultation may be made by subordinate legislation. Will the Minister give an undertaking that, if substantive points come up, he will be prepared to reconsider amendments either on Report or in another place?

Mr. McLeish: That is for the procedures of the Committee. If hon. Members want to raise further items at a later stage, they can obviously be discussed. The Inland Revenue will have prepared the paper for the purposes of consultation with employers and others. As a courtesy, the paper was placed in the Library. I have already referred to the administrative convenience.

Mr. Swinney: I accept the Minister's remarks about the arrangements for the paper. Will there be more papers of that nature? From a cursory glance, the paper does not seem to cover all the issues that concern me in relation to clause 71 and the definition of Scottish taxpayers. Although the Minister may have more to say in a later debate, I seek his reassurance on that point.

Mr. McLeish: I shall indeed have something further to say about that. I hope for continuing consultations, in addition to the paper that is being published. Moreover, the Revenue intends to call in employers to discuss implementation of the tax. I anticipate further papers clarifying some of the issues that will be involved.
There is something synthetic about the concern expressed by Conservative Members this evening. Since 11 September, many people have taken the result very seriously—the result being a Scottish Parliament. The result also meant, however, a tax-varying power. Despite the ringing endorsement by the Scottish people, by a ratio of 2:1, I detect at best a grudging acceptance of their decision by the Conservative Opposition.
It does little good to distort and exaggerate. The Conservatives' grudging acceptance is cloaked in further attacks on the democratic wishes of the Scottish people. It is always very dangerous for democracy when people seemingly insult a decision arrived at in this way. It is the business of this Committee to scrutinise the technicalities, not to revisit old arguments—yet that is what the Tories

have done under the guise of apparently supporting the measure. They actually harbour deep misgivings about what is happening—

Several hon. Members: rose—

Mr. McLeish: I see that they are getting edgy.

Dr. Fox: What are the Prime Minister's economic reasons for saying that his party will not support the use of the tax-raising power?

Mr. McLeish: The subject was well aired before publication of the White Paper on 24 July, and before the referendum of 11 September. It is no secret that we are committed to that for the lifetime of this Parliament.

Mr. Desmond Swayne: Does the Minister accept that we tabled our amendments solely to ensure that the Scottish people get exactly what they voted for and nothing else?

Mr. McLeish: Not at all. That is not the import of the amendments. There was a tax-varying question, linked to what the White Paper said, on the ballot paper. We made it clear that we were talking about income tax. The business community has moved on from these points already. Business people wanted fairness: that is what they have got. They wanted uncertainty cleared up; the business community is always rightly apprehensive of change. All that has formed the basis of the discussions between the Government and the business community. While that community has begun to look at the technicalities and the impact of the tax-varying power, Conservative Members have not moved an inch since the result was declared on 12 September.

Mr. Heald: If the measure applies only to income tax, why not say so? Could it be because the Government, with their secret agenda, intend later to include capital gains tax?

Mr. McLeish: Conservative Members should apply themselves to clause 69(1):
Subject to section 70, this section applies for any year of assessment for which income tax is charged".
That is clear to every party in the House except the Conservative party. No matter how many times Conservatives are told that this concerns income tax, they will not acknowledge the fact—on political, not technical grounds.

Mr. Dalyell: Is the business community completely satisfied with the Government's position on a uniform business rate?

Mr. McLeish: I think the business community is satisfied with our openness and with the dialogue that we have had with business people. They have acknowledged that the power over the uniform business rate, linked as it is to the structure of local government, is being passed to the Parliament, not to local government itself. The Parliament will determine the matter. I am well pleased with our discussions so far. Recently the CBI met my right hon. Friend the Secretary of State and agreed to submit its


thoughts on some of the technical issues surrounding the tax. It has now done that; I believe that the Inland Revenue is to hold further discussions with the CBI to respond to its points. I am content with the process—

Mr. Ancram: But are business people?

Mr. McLeish: Conservative Members should do some reading about what industry and business are saying. The life companies, for instance, are allowing their staff to stand for the Scottish Parliament, protecting their jobs and interests in the meantime.

Mr. Dalyell: I have said before that there is some concern about the responsibilities of the life offices. Will it be they or the Revenue which will be responsible for making information available?

Mr. McLeish: It will be a matter for the Inland Revenue, which will notify the life companies of what needs to be done.
6.15 pm
At some point, Conservative Members will have to come clean on where they stand—not for the benefit of the Government, the Liberal Democrats or the nationalists, but for the benefit of the Conservative party in Scotland, which may be interested in participating in elections there. Conservative Members ask who will decide whether the tax-varying power is to be used. The answer is: possibly the Conservatives. They have no locus in this House when it comes to Scotland, following 1 May, but they should be careful when deciding whether to accept the verdict of 11 September. They should not undermine the efforts of Scottish Conservatives to be elected to the Scottish Parliament—an outcome most democrats would want, yet it could be jeopardised by what the Opposition say in this Committee.
Amendments Nos. 352 to 355, 358 to 365, 369, 383, 386, 391, 394, 395 and 398 would replace each reference to tax-varying powers or taxpayers in the Bill with a reference to income tax-varying powers or income tax payers. The amendments are simply not necessary. Clause 69 makes it quite clear that the tax-varying power applies solely to income tax and thus to income tax payers. Clause 72(3) would confine any future replacement of the proposed tax-varying powers to income tax.
There is nothing more I can say on the subject. The amendments are superfluous and should not be agreed to.

Mr. Ancram: That was a most inadequate response. These days it seems that if we are told by the Minister that black is white, we need not see it on the face of the Bill. His whole argument is predicated on the idea that because he has said before that the provision relates to income tax, that need not be stated in the Bill. Certainly, from the point of view of Scottish business, that is inadequate.
The Minister keeps saying that clause 69 makes it clear that this is about income tax. I have read it again. It refers to
any year of assessment for which income tax is charged".

If that is indeed about income tax, why does the Minister resist the simple addition of the word "income" to make the measure clear beyond peradventure?
We are only trying to bring about some confidence and stability. I would expect the nationalists to attack us, but when even the Liberal Democrats suggest that we have a hidden agenda, it becomes disappointingly clear to me that they have not understood the depth of concern in Scotland. My hon. Friends have admirably highlighted the uncertainties generated by these provisions; the Minister has not begun to answer any of them.
Once again, we have heard the protests that this is a wrecking group of amendments tabled by the Opposition. The Minister has given no serious consideration to them. He says that the Government do not need to clarify, yet when he introduced the paper from the Inland Revenue today, he said that it was the first of a number of papers whose purpose will be to clarify these issues. Those were his words—to clarify these issues. In saying that, he is accepting that there are doubts, that there are questions that need to be answered, and that clarification is required, yet when we seek to make a simple clarification in the Bill, he throws his hands in the air and says that he cannot accept it. Then he wonders why we are suspicious.
The Minister says that the business community in Scotland has moved on, that it is satisfied with the provisions, and that our need for clarification is not the need of the business community. Why, then, did representatives of the CBI go to see him on 30 January to ask for clarification and to get an assurance that capital gains tax would not be affected by the provision?
If the Bill and the arguments are so clear and so patent, and the Scottish people have seen and heard them for the past eight months, why does a senior organisation representing Scottish business take a different view and feel the need to ask for that reassurance? Why was the Minister so keen to give us that reassurance from the Dispatch Box again last week at Scottish questions? Because he, too, knows that there are doubts in Scotland, and that those doubts are dangerous and destabilising. He wants to offer reassurance not in the Bill, but from the Dispatch Box.
The Minister's attitude is breathtaking in its complacency. He was asked by the hon. Member for Linlithgow (Mr. Dalyell) whether he was satisfied that the Scottish business community was reassured about the uniform business rate. If I understood his answer, which was not easy to understand, he seemed to say that the business community was pathetically grateful that he had been prepared to talk to its representatives.
There are real business decisions—investment decisions—to be taken, all of which will be taken on the basis of the confidence that Scottish business has in the Government's proposals in relation to tax, but we have again heard nothing that creates any more confidence in that regard.

Mr. Wallace: Does the right hon. Gentleman accept that even if all his amendments were accepted, it would make no difference to the powers of the Scottish Parliament in relation to the uniform business rate?

Mr. Ancram: Not these particular amendments—

Mr. Wallace: Those are the ones that we are discussing.

Mr. Ancram: I said earlier that the entire clause relates to confidence in tax varying. We have tabled new clauses


that we shall discuss later, which deal with that specific problem, so the hon. and learned Gentleman will see that we are consistent in our approach.
I am sorry about the view that the Minister has taken. These were useful amendments, which could have created confidence. Throughout our consideration of the Bill, his reaction to any amendments tabled by the Opposition—even by the Government's friends, the Liberal Democrats, who are now protesting about not having any amendments accepted—has been arrogant resistance to any constructive suggestion. That is disappointing, but I shall not press the matter. I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.

Mr. Heald: I beg to move amendment No. 356, in page 29, line 23, at end insert—
'(3A) The income mentioned in subsection (3) to which section 1A of the Income and Corporation Taxes Act 1988 applied for that year shall also be treated as income of that kind even where the taxpayer's total income from all sources exceeds £25,500 in that year.
(3B) The income referred to in subsection (2) does not include income from any annuity purchased from a pension fund.'.

The Temporary Chairman: With this, it will be convenient to take amendment No. 357, in page 29, line 35, at end add—
'(6) Split year concessions shall apply to resolutions passed by the Scottish Parliament as they apply under the Income and Corporation Taxes Acts.'.

Mr. Heald: Amendment No. 356 proposes adding two new subsections, (3A) and (3B), to clause 69. New subsection (3A) seeks to ensure that any tax supplement resolved on by the Scottish Parliament should not have effect as against income from savings and distributions, even if the Scottish taxpayer's income exceeds £25,500 in that year.
To put that in context, clause 69(2) applies the income tax Acts to Scottish taxpayers so that the UK rate—the basic rate—is increased or reduced by the amount resolved by the Scottish Parliament. Clause 69(3) provides that income from savings and distributions is not to be considered for that purpose, but that is done by reference to section 1A of the Income and Corporation Taxes Act 1988.
Section 1A provides that income from savings and distributions is to be taxed at the lower rate in the United Kingdom, but if a taxpayer's total income exceeds £25,500, tax is paid on the top slice at the higher rate, and income from savings and distributions is considered under subsection (5) as the highest part of his income and taxed at 40 per cent. less the 20 per cent. already deducted.
The amendment seeks answers to two questions. For the purposes of the Scottish tax supplement, will income from savings and distributions be completely disregarded, or will such income be considered for tax as the highest part of the taxpayer's income and be brought into the Scottish tax supplement if the total income exceeds £25,500? In other words, will the tax supplement apply to basic rate taxpayers and those in receipt of savings and distributions income in so far as the total income exceeds £25,500, or does section 1A apply only to define the categories of income to be disregarded, and may subsection (1)(b) and subsection (5) of section 1A therefore be ignored for these purposes?
That was a fairly technical argument, but I can see that one or two Labour Members followed it closely. New subsection (3B) would remove pension income from the Scottish tax supplement. As at present drafted, clause 69, subject to my previous comments, would exempt savings and distributions income, but not pension income. It is an anomaly that senior citizens in receipt of a pension should pay the tax, while those who rely on other savings income should not.
The Government may argue that savings are made out of taxed income and should therefore be exempt from further taxation, and that it would be wrong to tax twice. However, as we have seen, the income under section 1A of the 1988 Act is already taxed, albeit at a lower level. It is true that pension contributions attract tax relief and that pensions in payment are taxable, but the agreement between the Government and the taxpayer has been that tax relief will be at the current UK tax rate, and that pensions in payment will be taxed at the current UK tax rate.
Pension scheme members have made their contributions, as have their employers, on the basis of the present situation, and have made their projections of the necessary required income for retirement on that basis. Is it fair to change the rules retrospectively and impose a new tax on those with fixed incomes—pensioners who have no opportunity to increase their income, because their working lives are over?
For the past 18 years, the Conservative Government were anxious to increase the number of people who had pension provision. The number went up by more than 6 million. That was against a background of falling income tax rates. In recent years, Labour has given people taking out pension provision the idea that Labour would agree to the system where tax rates fall rather than rise. It is doubly cruel now to increase the rate of tax for pensioners while leaving other savers untouched, as pensioners cannot change their position, claw back the money, put it back into their pension schemes and save the situation for the future.
Furthermore, is it right as a matter of policy to disadvantage pension scheme savers in comparison with other savers? Other savers have made their savings from taxed income, but at the current UK rate. They have not paid the Scottish tax supplement. If they are to be exempt from the tax supplement on the fruits of their investments, why should pensioners pay it?
There is an imbalance between the way in which two kinds of savers, both possibly saving for their retirement, are treated. Is it right for a Government to discriminate against pensioners? Pensions are thought by many to be the best form of investment for retirement. The money is set aside permanently, and employers are prepared to make contributions to pension funds as part of their employment policy. Everyone recognises that good-quality pensions help the individual to meet his expectations of retirement.
Until recently, all Governments have gone to great lengths to extol the benefits of pension provision, not least because it eases the burden on the public purse at a time when we face an increasing aging population. At present, there are three pensioners for every worker. By 2030, there will be five pensioners for every worker. Against that background, rather than abandoning that pension policy, should not the Government support those who


make provision in that way? We have already seen the £5 billion pensions raid and now we have this discrimination against Scottish pensioners. I ask the Government to think again and to accept amendment No. 356.
There is a certain mean-spiritedness about this tax-varying power—grossing up charitable gifts not by the amount of the Scottish tax supplement but only by the United Kingdom basic rate; and not giving full relief for home income plans, which are restricted to the basic rate instead. There are 15,000 plans in the United Kingdom and no doubt there are many in Scotland. Do the Government wish to send the message, "Don't be a Scottish pensioner or a Scottish home income plan owner"? I do not think so. That is why the Government should consider the amendments seriously.
6.30 pm
Amendment No. 357 seeks to maintain the extra-statutory concession on split years for the Scottish tax supplement. Under United Kingdom tax law, anyone who is resident in the United Kingdom for part of a tax year is liable for tax for the whole year in respect of his whole income. In theory, if he is resident in the United Kingdom for a day and then moves to the United States, he is liable to pay tax for the whole year on his whole income. The Revenue has recognised the unfairness of that and has made an extra-statutory concession that involves splitting the tax year, so that income arising after departure is not subject to United Kingdom tax.
It is not clear whether that concession applies to the Scottish tax supplement if a person moves to England or abroad to the United States, for example. It is important that the Government clarify their position. It would be wrong to discriminate against those who seek to exercise mobility of labour. I ask the Government to consider both amendments seriously, and I hope that the Minister will accept them.

Mr. Dalyell: In the previous discussion, I asked whether donations to charities would be treated according to Scottish or United Kingdom taxation rules. I put that question then in the expectation that we might not reach these amendments, and I wonder whether it would be convenient for the Minister to answer now. I asked also about the treatment of annuities. The Minister did not touch on that issue in his winding-up speech, but that matter may be dealt with more properly now.
I have one more question about pay-as-you-earn treatment—forgive me if it does not relate to the amendments, but I do not know when it will be appropriate to raise it. Would it not create less of a burden and be administratively easier if tax years could be split? For example, if someone arrives in Scotland from England on 1 September, the Scottish rate will affect PAYE for the whole year of assessment. That creates an additional burden for employers and employees, which may result in an employer paying an additional salary or in an employee seeking to postpone his arrival in Scotland. Now is probably as good a moment as any to ask about the treatment of PAYE.

Mr. Wallace: I should declare an interest in the discussion, as I am the parliamentary adviser to the Institute of Chartered Accountants in Scotland. I have had discussions with the institute regarding some technical matters in the Bill—although obviously any political gloss I may put on them is entirely my own. I welcome the fact that the hon. Member for North-East Hertfordshire (Mr. Heald) has moved the amendments. This is the stuff of the Committee stage; we should examine the details of the legislation. The hon. Member for Linlithgow (Mr. Dalyell) also raised important detailed points.
The amendments raise concerns about the way in which clause 69(1) and (2) will interact with the general operation of income tax as it affects Scottish taxpayers. I understand that clause 69(2) makes the provision part of income tax legislation, so it should apply the next time we have a consolidation.
Given that the Scottish variable rate applies to income tax, does it apply also to tax relief? I note that the charitable deeds of covenant are covered by the consultation paper and that tax relief will continue to apply at the United Kingdom basic rate, regardless of the tax position of the donor. I am not 100 per cent. certain that the provisions in clause 69 will achieve that aim. We could have a political debate about whether they should achieve it—the hon. Member for North-East Hertfordshire said that the deeds of covenant should attract tax relief if someone pays a higher rate.
Many charities have found that successive reductions in the rate of income tax have led to reductions in their income. Putting aside that political point, I seek an assurance from the Minister about precisely how the position that he sets out in the paper with regard to the deeds of covenant can be achieved by the structure of the changes to the Scottish rate of income tax as set out in clause 69.
In terms of simplicity, there is much to commend the extra-statutory concession. We want simplicity, but I would hesitate to allow a Bill that deals with fundamental constitutional matters to make a major taxation change. There is much to be said for putting such extra-statutory concessions into taxation legislation. It is not satisfactory to achieve fundamental taxation change by way of extra-statutory concessions.
My final point relates to annuities. I understand that we have different tax rates to which annuities from pension funds do not apply, principally because the Conservative party made that distinction. I think that the former Chancellor, the right hon. and learned Member for Rushcliffe (Mr. Clarke), introduced that provision. If there is a tax break going in, it is not unreasonable that there should be tax coming out. We seek confirmation from the Minister on that point. If, for the sake of argument, the tax rate in the Scottish Parliament is 24 per cent., would a contribution attract a tax break at 24 per cent? If that is so, it is not unreasonable that it should be taxed at the Scottish rate when the payment is taken out.

Mr. Swinney: I wish to make a brief contribution to the consideration of amendments Nos. 356 and 357. I believe that amendment No. 357 is the better of the two. In the past few weeks, I have received several representations from specialist organisations in the financial services sector and from the business community about some of the details surrounding these provisions.
I take the point made by the hon. and learned Member for Orkney and Shetland (Mr. Wallace): there is concern about the publication of the consultation paper. It is felt that too many details about the application of the tax-varying powers will be settled by secondary provisions and do not form part of the Bill. A key concern that has been drawn to my attention is the definition of "Scottish taxpayer" in clause 71.

Mr. Heald: I am rather surprised by the hon. Gentleman's comments. He spends a good deal of time telling us that details do not have to be on the face of the Bill, and now he says that they should. Can he not decide?

Mr. Swinney: That is such a lot of rubbish that I will not even bother to respond.
The Government have introduced in the Bill the concept of Scottish taxpayers. I understand their motivation for doing that, but I disagree with the method and the mechanism that they have proposed.
This debate is similar to the one that I suspect we shall have on clause 71; the definition of Scottish taxpayers should be much more closely related to residence than the Government propose.
I am particularly concerned about split-year concessions. I have anxieties about the bureaucracy and the administrative hassle and costs of gathering information for the proposed days test, and I believe that the Bill should make clearer the issues relating to the split-year concessions. If the Revenue can deliver a split-year concession for individuals who leave the United Kingdom for other tax jurisdictions, I am sure that a mechanism could be designed adequately to protect the right to a split-year concession for people who leave Scotland for another part of the United Kingdom.
We need guarantees that such mechanisms will be implemented, but the days count is inadequate; it is cumbersome and unnecessary, and it does not provide sufficient clarity. I understand the Government's enthusiasm to maximise revenues, but they must do so through the consistent application of tax practice and definitions, which are sadly lacking in the Bill.

Mr. Grieve: This is an interesting debate; it has become clear that, far from being simple, the 3p income tax variation is a matter of considerable complexity. Nothing illustrates that better than the preferential treatment that will be accorded to those who are in receipt of unearned income from stocks and shares, as opposed to those who have saved for their pensions. Given the Government's proclaimed interest in pensioners, the fact that they are making such a differentiation comes as something of a surprise.
We hope that the Government will accept the amendments, which would ensure parity between those who receive unearned income and those who receive pensions. Pensioners tend to have nothing else to fall back on for their income, yet they will be unfairly penalised in comparison with those who enjoy unearned income from other sources.
Another illustration of the measure's complexity is the split-year concession, about which the hon. Member for North Tayside (Mr. Swinney) and other hon. Members have spoken tellingly. If income tax rates differ in Scotland and England, the concession will be of great

importance to those who work in and out of Scotland, and the Government should take that into account when they consider how the income tax mechanism will work.
As I understand the Government's thinking, they have moved from the principle that tax variation will occur only in relation to income tax to the position that it will affect only taxed, earned income. If so, they would be wise to nail their colours to the mast and leave it at that; otherwise, we shall end up with a series of bizarre anomalies—one need only look, for example, at the wording of the Inland Revenue's detailed statement to realise that some items that would normally be treated as income will be exempt. That is a recipe for the system to be considered unfair. If tax variation will apply only to the income earned by those who are earning, so be it; if not, the Government should consider the whole matter again.

Mr. Collins: Again, this is an important debate, as it enables us to flush out the Government's intentions. Amendment No. 357 deals with split-year concessions, and we should be aware that it is somewhat naive to operate a system on the assumption that most people—or even a significant number—will move from Scotland to England or vice versa just as one tax year ends and another begins. The Bill should make clear provision to take account of the fact that most people will move at other times of the year.
It is important to note that, once again, more Conservative Members are present than Labour Members, even though there are, sadly, two and a half times as many Labour Members as Conservative Members. The Scottish Parliament is supposed to be the flagship of the Government's programme, but in this debate on a matter of great significance—taxation—the Labour Benches are not filled. Is that because Labour Members do not believe that these matters are important, or do they think that the Government's case is difficult to support?
With the honourable exception of the hon. Member for Linlithgow (Mr. Dalyell), Labour Back Benchers have been entirely silent all afternoon. That needs to be noted; it betrays not only the contempt in which many Labour Members hold the House, but their indifference to matters of taxation, income and the management of the Scottish economy, which are of great importance to the people of Scotland and to all those who want every part of the United Kingdom to operate a strong and prosperous economy under a clear financial framework.
6.45 pm
Amendment No. 356 is important; we want the Government's attitude to people whose income is greater than £25,500 per year to be put on the record. Those who were around in the run-up to the 1992 general election—I was in a very junior capacity—will remember the Labour party's immense difficulties over whether someone who earned £21,000 or £22,000 per year was affluent. At a famous dinner at an Italian restaurant, which was attended by journalists, the then leader of the Labour party, Mr. Neil Kinnock, changed policy on the treatment of employers' national insurance contributions.
That was as significant then as it is now, as we need to know what the Government's rhetoric means. They talk about people who are prosperous, who can afford to pay


and who should be encouraged to make sacrifices for the wider community, but at what income will the affluence test start to bite?
As we learned during the debate on the previous group of amendments, the Government are reluctant to specify in the Bill the assurances that they gave during the referendum campaign and on other occasions—that the Scottish Parliament will be given powers to vary only income tax. If they reject the amendments, there will be a suspicion that the Labour party is pursuing an agenda in which people of a certain income—it may be £20,000, £25,000 or £30,000—should pay more.
The amendments were tabled to find out how much the Minister believes people's income should be before it is reasonable to expect them to pay more towards services, whether they are in Scotland or the rest of the United Kingdom. I should be interested to hear his definition of the affluence test—an idea that the Secretary of State for Social Security floated during a famous "Today" programme interview, but which was denounced a few hours later by Mr. Alastair Campbell from No. 10 Downing street, who—unconstitutionally—holds much greater power than any member of the Cabinet, with the possible exception of the Prime Minister.
I hope that the Minister will make clear the Government's position on pensioners. The pensions tax that was imposed in last year's Budget gave us some idea, but we want the Minister to put it on the record whether the Government are interested in the concerns of pensioners, particularly those with private pension provision.
I hope that, in the Minister's response to amendment No. 356, he will also clarify the Government's position on the key question of people with middle incomes, to which many people below them aspire. Does he believe that they should be asked to delve deep into their pockets to pay for socialist spending plans, whether they be from Holyrood or Westminster?

Mr. Syms: I listened to my hon. Friend the Member for North-East Hertfordshire (Mr. Heald) eloquently introducing the amendments. I think that all of us have been impressed by the technicality of the clauses that we are discussing. We have had to listen carefully to explanations of what they mean.
The arguments behind amendment No. 356 are telling. Unearned income will not be taxed, but pensioners will find themselves under a tax burden. We all know that many pensioners are on a fixed income. Many have planned for their retirement for many years, only to find that the burden of the proposed taxation will diminish their living standards in retirement. I support the amendment.
I support also amendment No. 357. As the hon. Member for Linlithgow (Mr. Dalyell) said, split years are an important issue. People are moving from one address to another and changing jobs all the time. Many of those moves and changes take place within the United Kingdom and many are international. If we can have recognition of split years under our income tax and corporation tax arrangements for people who go abroad, it seems not

unreasonable that we should have such arrangements for people who move between Scotland and England or from Scotland to any other part of the United Kingdom.

Mr. McLeish: The hon. and learned Member for Orkney and Shetland (Mr. Wallace) asked about the tax treatment of pensions. If the Scottish rate were to be 24 per cent., would contributions attract relief at 24 per cent? The answer is yes.
The hon. and learned Gentleman referred also to the treatment of charities and asked how that would be achieved in the Bill. That will be done by invoking the powers in clause 75(2) by regulation in so far as that is necessary. That is one of the issues on which the Inland Revenue is consulting.
My hon. Friend the Member for Linlithgow (Mr. Dalyell) raised the issue of pay-as-you-earn treatment. I can tell my hon. Friend that PAYE will operate as normal. Indeed, that was made clear in the White Paper. The Inland Revenue will be consulting employers on detailed operational matters, covering such issues as how best to deal with people who move to and from Scotland in any one year.

Mr. Dalyell: Is the Inland Revenue considering a split year?

Mr. McLeish: I shall take up that question in response to the amendments.
The hon. Member for North-East Hertfordshire (Mr. Heald) asked whether it is fair to tax pension payments at the higher rate at which the contributor obtained tax relief in contributing to his or her pension fund. If a Government committed themselves to tax pensions only at the same rate at which they gave relief on pension contributions, it would not be possible to alter tax rates, including lowering them.
I shall take up some of the substantial points that were made by the hon. Member for North-East Hertfordshire. Amendment No. 356 is clearly based on a paper produced by Deloitte and Touche. The argument seems to be that section 1A of the Income and Corporation Taxes Act 1988 is a form of allowance and that, after that slice of income is, in effect, cut out, the next slice can fall into the gap. But that is not quite right. Sections 1 and 1A of the 1988 Act and clause 69 work together.
The rules take account of a person's total income, as arranged in a certain way, which basically puts savings income on top. From this are deducted personal allowances, and what income is left is divided into rate bands. For 1997–98, the first £4,100 is taxed at the lower rate of 20 per cent. Income from £4,101 to £26,099 is taxed at the basic rate of 23 per cent. The balance is taxed at the higher rate of 40 per cent.

Mr. Dalyell: My hon. Friend will be aware of the concern of the Institute of Chartered Accountants in Scotland, which is asking whether income tax is to be withheld at 23 or 26 per cent. Thereafter, will the payer be given tax relief for an annual charge of 23 or 26 per cent? Are there special rules for cross-border annual payments? That refers to the Income and Corporation Taxes Act 1988.

Mr. McLeish: I intend to deal with the cross-border issue. However, at this stage I refer my hon. Friend to the answer I gave to the hon. and learned Member for Orkney and Shetland a few minutes ago.
The Scottish variable rate can apply only to the £4,101 to £26,099 band, which is taxed at 23 per cent. According to section 1A of the 1988 Act, the 23 per cent. charge cannot apply to savings income. Thus, the SVR does not apply to savings income. Contrary to what seems to be implied by the amendment, part of the balance of income in excess of £26,100 does not drop down into the space to be taxed at the SVR. In our view, the first half of the amendment is unnecessary.
There are two types of annuity to which the second half of the amendment might conceivably apply. They are what are termed as PAYE annuities, which are taxed under schedule E—that is income from employment—and payments to holders of retirement annuity contracts, which are annual payments taxed under schedule D. Basically, we are talking about pension income, and that has been alluded to by Opposition Members.
In the proposed terms of new subsection (3A), the amendment is unnecessary. Current legislation already achieves what is intended. As Deloitte and Touche made clear in its paper, even it is not sure whether there is a problem with the definition of savings income in the Bill. All that it wanted was an assurance, and I am happy to give that.
The amendment is not so attractive when we come to new subsection (3B). The sort of annuity to which it refers is essentially a form of deferred income. There is no reason why it should not be within the ambit of the tax-gathering power, along with other earned income.
Excluding certain pension income would produce a mismatch with the relief given to Scottish taxpayers on pension contributions. That seems wrong and would arguably be to the disadvantage of other UK-resident taxpayers.

Mr. Heald: Is it not the point that contributions attract tax relief at the current UK rate? The same is not true of the pension in payment, which will be taxed at the current UK rate plus whatever the Scottish tax supplement is. How can that be consistent with the treatment that the Government are giving to savers, which is entirely different? They paid the money in tax at the UK rate, yet they are being exempted from the Scottish tax supplement. The two approaches are unequal. Why are the Government discriminating against pensioners, of all people?

Mr. McLeish: If we take the two annuities that have been implied in the amendments, they would be regarded as pensions. However, the Deloitte and Touche report refers to purchased life annuities. As premiums do not carry tax relief, they are considered as savings and will be excluded.
In Scotland, pensioners will be subject to the powers on deferred income. However, fewer than 15 per cent. of over-65s will be affected and the average impact is £140 for aged taxpayers where the basic rate will be their marginal rate. There is a distinction that we are declaring openly and honestly in relation to savings as against deferred income. We believe that deferred income should be subject to the SVR.
I move on to the question of Inland Revenue extra-statutory concession—that is ESC A11—which is raised by amendment No. 357. It will apply in the normal way, notwithstanding the Bill's provisions. I can give the

Committee that assurance. The argument that has been advanced this evening differs from the general issue of the extra-statutory concession.
If the intention is to apply the principles in the ESC to those who move between Scotland and elsewhere in the UK during any tax year, I am not prepared to accept it. It would be an administrative nightmare for employers and the Inland Revenue alike. It would be necessary to revisit Scottish taxpayers' status part way through the tax year. The only fair way to operate the rules in relation to in-year movers is to determine where in the UK they have spent most of the tax year, or where their UK principal home was for most of the tax year. We shall soon be discussing that matter. Clause 71 provides appropriate and fair rules, and nothing more is needed.

Mr. Swinney: How much more of an administrative burden does the Minister believe the information for a split-year concession would be, as measured against the colossal bureaucracy of the days test for every Scottish taxpayer?

Mr. McLeish: I would not accept that proposition. We shall have a chance to respond to it when we come to the specific question. We advise the Committee to vote against the amendments.

Mr. Heald: The Minister's reply was a disappointment. The Opposition have pointed to a gross discrimination against pensioners. People who paid tax at the UK rate will have their position on savings entirely protected, whereas pensioners who have made their contributions on the basis of tax relief for the UK rate are being discriminated against. There is no equality between the two.
As my hon. Friend the Member for Beaconsfield (Mr. Grieve) said, we are dealing with a complex matter, but one of justice. As my hon. Friend the Member for Westmorland and Lonsdale (Mr. Collins) said, we are faced with an attack on pensioners. It is, indeed, a breach of faith. As my hon. Friend the Member for Poole (Mr. Syms) said, an individual pensioner living on a fixed income will be discriminated against when he has set his arrangements for retirement on the basis of certain knowledge that the current UK tax rate will be the contribution tax relief and the basis on which he is taxed. It is a breach of that agreement. We are dissatisfied with the Minister's answer. The answer on split years is equally wrong, giving no consideration to those who wish to exercise mobility of labour. On that basis, we shall press the amendment to a Division.

Question put, That the amendment be made:—

The Committee divided: Ayes 130, Noes 339.

Division No. 175]
[6.59 pm


AYES


Ainsworth, Peter (E Surrey)
Bottomley, Peter (Worthing W)


Amess, David
Bottomley, Rt Hon Mrs Virginia


Ancram, Rt Hon Michael
Brooke, Rt Hon Peter


Arbuthnot, James
Browning, Mrs Angela


Atkinson, Peter (Hexham)
Bruce, Ian (S Dorset)


Baldry, Tony
Butterfill, John


Bercow, John
Cash, William


Beresford, Sir Paul
Chapman, Sir Sydney (Chipping Barnet)


Body, Sir Richard



Boswell, Tim
Chope, Christopher






Clappison, James
Loughton, Tim


Clark, Rt Hon Alan (Kensington)
Luff, Peter


Clark, Dr Michael (Rayleigh)
Lyell, Rt Hon Sir Nicholas


Clarke, Rt Hon Kenneth (Rushcliffe)
McIntosh, Miss Anne



Maclean, Rt Hon David


Clifton—Brown, Geoffrey
McLoughlin, Patrick


Collins, Tim
Madel, Sir David


Cormack, Sir Patrick
Malins, Humfrey


Curry, Rt Hon David
Maples, John


Davies, Quentin (Grantham)
Maude, Rt Hon Francis


Davis, Rt Hon David (Haltemprice)
Mawhinney, Rt Hon Sir Brian


Duncan, Alan
May, Mrs Theresa


Duncan Smith, Iain
Moss, Malcolm


Emery, Rt Hon Sir Peter
Nicholls, Patrick


Evans, Nigel
Ottaway, Richard


Faber, David
Page, Richard


Fabricant, Michael
Paice, James


Fallon, Michael
Paterson, Owen


Forth, Rt Hon Eric
Pickles, Eric


Fowler, Rt Hon Sir Norman
Prior, David


Fox, Dr Liam
Randall, John


Fraser, Christopher
Redwood, Rt Hon John


Garnier, Edward
Robertson, Laurence (Tewk'b'ry)


Gibb, Nick
Roe, Mrs Marion (Broxbourne)


Gill, Christopher
St Aubyn, Nick


Gillan, Mrs Cheryl
Sayeed, Jonathan


Gorman, Mrs Teresa
Shephard, Rt Hon Mrs Gillian


Gray, James
Shepherd, Richard


Greenway, John
Simpson, Keith (Mid—Norfolk)


Grieve, Dominic
Soames, Nicholas


Gummer, Rt Hon John
Spelman, Mrs Caroline


Hague, Rt Hon William
Spicer, Sir Michael


Hamilton, Rt Hon Sir Archie
Spring, Richard


Hammond, Philip
Stanley, Rt Hon Sir John


Hawkins, Nick
Steen, Anthony


Hayes, John
Streeter, Gary


Heald, Oliver
Swayne, Desmond


Heathcoat-Amory, Rt Hon David
Syms, Robert



Tapsell, Sir Peter


Hogg, Rt Hon Douglas
Taylor, Ian (Esher & Walton)


Horam, John



Howard Rt Hon Michael
Taylor, John M (Solihull)


Howarth, Gerald (Aldershot)
Taylor, Sir Teddy


Jack, Rt Hon Michael
Tredinnick, David


Jack, Rt Hon Michael
Trend, Michael


Jackson, Robert (Wantage)
Tyrie, Andrew


Jenkin, Bernard
Viggers, Peter


Johnson Smith, Rt Hon Sir Geoffrey
Wardle, Charles



Waterson, Nigel


Key, Robert
Whittingdale, John


King, Rt Hon Tom (Bridgwater)
Widdecombe, Rt Hon Miss Ann


Kirkbride, Miss Julie
Wilkinson, John


Laing, Mrs Eleanor
Willetts, David


Lait, Mrs Jacqui
Woodward, Shaun


Lansley, Andrew
Yeo, Tim


Leigh, Edward
Young, Rt Hon Sir George


Letwin, Oliver



Lidington, David
Tellers for the Ayes:


Lilley, Rt Hon Peter
Mr. Stephen Day and


Lloyd, Rt Hon Sir Peter (Fareham)
Mr. James Cran.




NOES


Adams, Mrs Irene (Paisley N)
Beard, Nigel


Ainger, Nick
Beith, Rt Hon A J


Ainsworth, Robert (Cov'try NE)
Bell, Martin (Tatton)


Alexander, Douglas
Bell, Stuart (Middlesbrough)


Allan, Richard
Benn, Rt Hon Tony


Anderson, Donald (Swansea E)
Bennett, Andrew F


Anderson, Janet (Rossendale)
Benton, Joe


Armstrong, Ms Hilary
Bermingham, Gerald


Ashton, Joe
Berry, Roger


Atkins, Charlotte
Betts, Clive


Austin, John
Blizzard, Bob


Ballard, Mrs Jackie
Blunkett, Rt Hon David


Barnes, Harry
Boateng, Paul


Barron, Kevin
Borrow, David


Bayley, Hugh
Bradshaw, Ben





Brake, Tom
Fitzsimons, Lorna


Brand, Dr Peter
Flint, Caroline


Breed, Colin
Flynn, Paul


Brinton, Mrs Helen
Follett, Barbara


Brown, Rt Hon Nick (Newcastle E)
Foster, Rt Hon Derek


Brown, Russell (Dumfries)
Foster, Michael Jabez (Hastings)


Browne, Desmond
Foster, Michael J (Worcester)


Buck, Ms Karen
Foulkes, George


Burden, Richard
Fyfe, Maria


Burgon, Colin
Galbraith, Sam


Butler, Mrs Christine
Galloway, George


Byers, Stephen
Gapes, Mike


Caborn, Richard
Gardiner, Barry


Campbell, Alan (Tynemouth)
Gerrard, Neil


Campbell, Mrs Anne (C'bridge)
Gibson, Dr Ian


Campbell, Menzies (NE Fife)
Gilroy, Mrs Linda


Caplin, Ivor
Godsiff, Roger


Casale, Roger
Goggins, Paul


Caton, Martin
Gordon, Mrs Eileen


Cawsey, Ian
Gorrie, Donald


Chapman, Ben (Wirral S)
Griffiths, Nigel (Edinburgh S)


Chaytor, David
Griffiths, Win (Bridgend)


Chidgey, David
Grocott, Bruce


Chisholm, Malcolm
Grogan, John


Clapham, Michael
Hain, Peter


Clark, Rt Hon Dr David (S Shields)
Hall, Mike (Weaver Vale)


Clarke, Eric (Midlothian)
Hall, Patrick (Bedford)


Clarke, Rt Hon Tom (Coatbridge)
Hamilton, Fabian (Leeds NE)


Clarke, Tony (Northampton S)
Hancock, Mike


Clelland, David
Hanson, David


Coaker, Vernon
Harvey, Nick


Coffey, Ms Ann
Heal, Mrs Sylvia


Coleman, Iain
Healey, John


Colman, Tony
Heath, David (Somerton & Frome)


Connarty, Michael
Henderson, Ivan (Harwich)


Cook, Frank (Stockton N)
Hepburn, Stephen


Corbett, Robin
Heppell, John


Corbyn, Jeremy
Hesford, Stephen


Corston, Ms Jean
Hill, Keith


Cousins, Jim
Hinchliffe, David


Crausby, David
Hodge, Ms Margaret


Cryer, Mrs Ann (Keighley)
Home Robertson, John


Cryer, John (Hornchurch)
Hoon, Geoffrey


Cummings, John
Hope, Phil


Cunningham, Rt Hon Dr John (Copeland)
Hopkins, Kelvin



Howarth, Alan (Newport E)


Cunningham, Jim (Cov'try S)
Howarth, George (Knowsley N)


Cunningham, Ms Roseanna (Perth)
Howells, Dr Kim



Hughes, Ms Beverley (Stretford)


Dafis, Cynog
Hughes, Kevin (Doncaster N)


Dalyell, Tam
Hughes, Simon (Southwark N)


Darling, Rt Hon Alistair
Humble, Mrs Joan


Darvill, Keith
Hurst, Alan


Davidson, Ian
Hutton, John


Davies, Rt Hon Denzil (Llanelli)
Iddon, Dr Brian


Dawson, Hilton
Jackson, Ms Glenda (Hampstead)


Dean, Mrs Janet
Jackson, Helen (Hillsborough)


Denham, John
Jamieson, David


Dewar, Rt Hon Donald
Jenkins, Brian


Dobbin, Jim
Johnson, Alan (Hull W & Hessle)


Dobson, Rt Hon Frank
Jones, Helen (Warrington N)


Donohoe, Brian H
Jones, Ms Jenny (Wolverh'ton SW)


Doran, Frank



Dowd, Jim
Jones, Dr Lynne (Selly Oak)


Drew, David
Jones, Martyn (Clwyd S)


Drown, Ms Julia
Keeble, Ms Sally


Eagle, Maria (L'pool Garston)
Keen, Alan (Feltham & Heston)


Edwards, Huw
Keen, Ann (Brentford & Isleworth)


Efford, Clive
Keetch, Paul


Ennis, Jeff
Kelly, Ms Ruth


Etherington, Bill
Kidney, David


Ewing, Mrs Margaret
Kilfoyle, Peter


Fearn, Ronnie
King, Andy (Rugby & Kenilworth)


Field, Rt Hon Frank
Kirkwood, Archy


Fisher, Mark
Kumar, Dr Ashok


Fitzpatrick, Jim
Laxton, Bob






Lepper, David
Rendel, David


Leslie, Christopher
Robinson, Geoffrey (Cov'try NW)


Lewis, Ivan (Bury S)
Roche, Mrs Barbara


Lewis, Terry (Worsley)
Rogers, Allan


Liddell, Mrs Helen
Rooker, Jeff


Linton, Martin
Rooney, Terry


Livingstone, Ken
Rowlands, Ted


Lloyd, Tony (Manchester C)
Roy, Frank


Lock, David
Ruane, Chris


Love, Andrew
Ruddock, Ms Joan


McAllion, John
Russell, Ms Christine (Chester)


McAvoy, Thomas
Ryan, Ms Joan


McCabe, Steve
Salmond, Alex


McCafferty, Ms Chris
Salter, Martin


McCartney, Ian (Makerfield)
Sanders, Adrian


McDonnell, John
Sarwar, Mohammad


McFall, John
Savidge, Malcolm


McGuire, Mrs Anne
Sawford, Phil


McIsaac, Shona
Sedgemore, Brian


Mackinlay, Andrew
Shaw, Jonathan


McLeish, Henry



McNamara, Kevin
Sheerman, Barry


McNulty, Tony
Sheldon, Rt Hon Robert


MacShane, Denis
Shipley, Ms Debra


McWalter, Tony
Short, Rt Hon Clare


Mahon, Mrs Alice
Simpson, Alan (Nottingham S)


Mandelson, Peter
Singh, Marsha


Marsden, Gordon (Blackpool S)
Skinner, Dennis


Marsden, Paul (Shrewsbury)
Smith, Rt Hon Andrew (Oxford E)


Marshall, David (Shettleston)
Smith, Angela (Basildon)


Marshall, Jim (Leicester S)
Smith, Rt Hon Chris (Islington S)


Martlew, Eric
Smith, Jacqui (Redditch)


Meacher, Rt Hon Michael
Smith, John (Glamorgan)


Meale, Alan
Smith, Llew (Blaenau Gwent)


Merron, Gillian
Smith, Sir Robert (W Ab'd'ns)


Michael, Alun
Snape, Peter


Michie, Bill (Shef'ld Heeley)
Soley, Clive


Michie, Mrs Ray (Argyll & Bute)
Southworth, Ms Helen


Milburn, Alan
Squire, Ms Rachel


Miller, Andrew
Starkey, Dr Phyllis


Mitchell, Austin
Steinberg, Gerry


Moonie, Dr Lewis
Stevenson, George


Moran, Ms Margaret
Stewart, David (Inverness E)


Morgan, Alasdair (Galloway)
Stewart, Ian (Eccles)


Morgan, Ms Julie (Cardiff N)
Stinchcombe, Paul


Morley, Elliot
Stoate, Dr Howard


Morris, Ms Estelle (B'ham Yardley)
Stott, Roger


Morris, Rt Hon John (Aberavon)
Stringer, Graham


Mountford, Kali
Stuart, Ms Gisela


Mudie, George
Stunell, Andrew


Mullin, Chris
Sutcliffe, Gerry


Naysmith, Dr Doug
Swinney, John


O'Brien, Bill (Normanton)
Taylor, Rt Hon Mrs Ann (Dewsbury)


O'Hara, Eddie



Olner, Bill
Taylor, David (NW Leics)


O'Neill Martin



Palmer Dr Nick
Temple—Morris, Peter


Pearson Ian
Thomas, Gareth R (Harrow W)


Pendry, Tom
Timms, Stephen


Pike, Peter L
Tipping, Paddy


Plaskitt, James
Todd, Mark


Pollard, Kerry
Touhig, Don


Pope, Greg
Trickett, Jon


Pound, Stephen
Turner, Dr Desmond (Kemptown)


Prentice, Ms Bridget (Lewisham E)
Turner, Dr George (NW Norfolk)


Prentice, Gordon (Pendle)
Twigg, Derek (Halton)


Prescott, Rt Hon John
Twigg, Stephen (Enfield)


Primarolo, Dawn
Tyler, Paul


Prosser, Gwyn
Vaz, Keith


Purchase, Ken
Wallace, James


Quin, Ms Joyce
Ward, Ms Claire


Quinn, Lawrie
Wareing, Robert N


Radice, Giles
Watts, David


Rammell, Bill
Welsh, Andrew


Raynsford, Nick
White, Brian


Reed, Andrew (Loughborough)
Whitehead, Dr Alan





Wicks, Malcolm
Wood, Mike


Williams, Rt Hon Alan (Swansea W)
Wray, James



Wright, Anthony D (Gt Yarmouth)


Williams, Alan W (E Carmarthen)
Wyatt, Derek


Willis, Phil



Wills, Michael
Tellers for the Noes:


Winnick, David
Jane Kennedy and


Winterton, Ms Rosie (Doncaster C)
Mr. Jon Owen Jones.

Question accordingly negatived.

It being after Seven o'clock, THE CHAIRMAN, pursuant to the Order [13 January] and the Resolution [this day], put forthwith the Question necessary for the disposal of the business to be concluded at that hour.

Clause 69 ordered to stand part of the Bill.

Clause 70

SUPPLEMENTAL PROVISION WITH RESPECT TO RESOLUTIONS

Mr. Donald Gorrie: I beg to move amendment No. 408, in page 30, line 26, leave out 'tax-varying' and insert 'tax-increasing'.

The Chairman of Ways and Means (Sir Alan Haselhurst): With this, it will be convenient to discuss amendment No. 366, in page 30, line 28, leave out '2000–01' and insert '2002–03'.

Mr. Gorrie: Our amendment would replace "tax-varying" with "tax-increasing". Opposition Members in the Scottish Parliament could propose a reduction in taxes, but only members of the Government could propose increased taxes. According to my hon. Friends, who are more experienced than I, that is the practice in this House. In giving Opposition Members as much freedom as possible, it would be reasonable to allow them to propose tax-reducing measures.
The amendment might appeal to Conservatives in particular. They are concerned about tax raising. If they succeed in having Members elected to the Scottish Parliament, they could propose tax-reducing measures. I am confused about where the Conservatives are coming from. Leaks to the press suggest that their leader is taking them in a new direction and that devolution and all associated with it is a good thing, although it should apply to the English as well as to the Scots. But today we are hearing the same old story: anything that the Scottish Parliament will be able to do must be bad.

Dr. Fox: The hon. Gentleman was not even here.

Mr. Gorrie: I beg your pardon.

The Chairman: Order. The hon. Gentleman is addressing the Chair in all remarks.

Mr. Gorrie: I beg your pardon, Sir Alan. I was being interrupted.
The amendment is straightforward. It is not of huge moment, but the conduct of the Scottish Parliament would be improved marginally if Opposition Members were allowed to propose a reduction in taxation.
7.15 pm
We do not support the Conservatives' proposal which would deny the Scottish Parliament the right to introduce tax-varying powers as soon as it wished. If it is to be a serious Parliament and is to have those powers, it should be allowed to use them.

Mr. Dalyell: I should like to ask about retrospection. What will be the combined effect of subsections (3) and (4) of clause 70? Subsection (3)(a) suggests that a determination of the UK Parliament may be made after the beginning of the year without it expressly being stated that such determination is necessarily to be effected in the year in question. Will not that have the consequence that, in theory, the tax-varying power could be applied retrospectively? In the hands of lawyers, that would be more than an arcane point.
I should also like to ask about double tax treaty relief. The vast majority of UK double tax treaties specifically refer to UK income tax. The provision that Scottish income tax will also qualify for double tax relief must be clarified. Clauses 69, 70 and 71 appear to replace the non-varied rate with a varied rate for Scottish taxpayers, but would the UK income tax rate still apply? Those two questions are rather significant.

Mr. Grieve: I was surprised at the comments of the hon. Member for Edinburgh, West (Mr. Gorrie). I understood that the amendment would limit the power of the Scottish Executive to move a motion to increase taxes. That perhaps was not a total surprise because of the reality in which the Bill will operate, but it was still a considerable surprise in the light of the representations made by the Government in the referendum campaign.
Many hon. Members will have no difficulty in agreeing that in the Scottish Parliament the Opposition should be able to table motions to reduce taxation, but that is not what would be achieved. I stand to be corrected, but my reading of this simple alteration is that the Scottish Executive would be allowed to move a motion to vary tax only upwards.

Mr. Wallace: It would mean that only a member of the Scottish Executive could propose a tax-increasing measure whereas any Member of the Scottish Parliament could propose a tax-reducing measure, which is precisely the position in this House.

Mr. Grieve: If that is what the Liberal Democrats seek, a further amendment is required.

Mr. Wallace: The hon. Gentleman has not read the amendment properly.

Mr. Grieve: I beg to differ.
Amendment No. 366 would postpone for one year the implementation of the tax-varying powers. It is not an attempt to curb the power of the Scottish Parliament: it reflects the debate that we have had this evening. It is abundantly clear that if the tax-varying powers are to operate successfully, they will require careful attention. The people in Scotland who will have to pay will need to prepare carefully, and may decide to save into pensions or into equities. Given the minutiae that the Inland

Revenue has presented us with, it is abundantly clear that accountants and tax lawyers will have a field day interpreting these provisions.
I hope that the Minister recognises that I have accepted that we must smooth the way for these changes. The provisions must be seen in the context of the real changes in the relationship between Edinburgh and Westminster. These tax measures add an extra and complex layer to what is already an extremely complex period of change.
It is clear from the White Paper on devolution that the Scottish Parliament is intended to be up and running over a period from May 1999 onwards. In those circumstances, the tax-varying powers should be postponed for 12 months, so that we can experience how the relationship between the Scottish Parliament and the United Kingdom Parliament and Government operates in practice. We trust that the Scottish Parliament will have a long life, so that seems a small concession to prudence. It would be a worthwhile concession, given the burden that will have to be borne by those in office.

Mr. Alex Salmond: I am puzzled about amendment No. 366, which would delay the change in the Scottish taxation provisions. Does it mean that the Conservative party has abandoned any attempt to lower the level of taxation that the Scottish Parliament can raise? Has it merely abandoned its attempt to do so until 2002–03, or has it abandoned any hope of doing so at any time?

Mr. Grieve: The hon. Member for Banff and Buchan (Mr. Salmond) misunderstands the position. We may argue in the future for a reduction in taxes in Scotland. We are concerned about the transitional period when these complex constitutional measures are being introduced. They will undoubtedly need to be smoothed through. I realise that the hon. Gentleman may not want them to be smoothed through, although he often argues to the contrary.
On a number of occasions, the hon. Gentlemen the has told the House that it is particularly important that the Scottish Parliament works for the benefit of the Scottish people. Assuming that he wants it to be up and running effectively, it may be more sensible for the stages to be introduced gradually. The hon. Gentleman has attended some of the debate, but not all of it, and if he had listened to the details of the tax principles, he would realise that there will be complex problems.
We take the view that there is no point adding to those problems. It may benefit the operation of the Scottish Parliament and smooth its relations with the House if, when it is up and running, there are no tax-varying powers for 12 months and those changes are held over until the following year.

Mr. McAllion: I congratulate the hon. Gentleman on his elevation to the Opposition Front Bench. He certainly improves the quality, although that is not very difficult. If he wants to postpone the tax-varying powers of the Scottish Parliament for 12 months, why does amendment


No. 366 postpone it for 24 months, from 2000–01 to 2002–03? Surely, if that is what he is trying to achieve, the amendment is wrong.

Mr. Grieve: I think not. The amendment would leave out 2000–01 and would insert 2002–03.

Mr. McAllion: That is two years.

Mr. Grieve: If that is the case, all the better. The purpose of the amendment is to allow a transitional period during which there would be no tax-varying powers.

Mr. McAllion: How long is that period?

Mr. Grieve: The amendment would introduce the powers in 2002–03.

Mr. McAllion: How long is that?

Mr. Grieve: If I may say to the hon. Gentleman, we have still not had complete clarity from the Government on how the transitional period from 1999 will operate.
I ask the Minister to consider the desirability of a transitional period before the tax-varying powers are introduced. I suggest that postponing the introduction of those powers until 2002 would be a valuable change.

Mr. Swinney: Before the hon. Member for Dundee, East (Mr. McAllion) intervened, I was going to welcome the hon. Member for Beaconsfield (Mr. Grieve) to the Opposition Front Bench. As a result of his rapid promotion to the Front Bench, I thought that my hon. Friends the Members for Moray (Mrs. Ewing) and for Banff and Buchan (Mr. Salmond) may think that it was time for young men to be put into the limelight of debate, but perhaps they were not paying careful attention. Having heard the hon. Gentleman's contribution, I do not think that he is a threat to some of his right hon. and hon. Friends on the Front Bench.
The hon. Member for Edinburgh, West (Mr. Gorrie) referred to the ability of Back Benchers to propose a motion to reduce taxation. That is a sensible measure and reflects the established procedure of the House. It would enable Back Benchers outwith the Scottish Executive to utilise the powers that are given to the Parliament. In a strange way, it may give Conservatives something to do and on which to focus when they get into the Scottish Parliament. They could try to challenge the other parties, which they think are determined to use the tax-varying powers only to increase taxation.
Amendment No. 366 would delay the implementation of these powers. We must bear in mind some practical realities. The Parliament will be elected in May 1999, and it will assume its responsibilities in 2000. A party making a tax-varying proposal at the election in May 1999 should be confident of delivering that proposal in the time scale offered by the legislation. Such a proposal in an election manifesto would not stand up to scrutiny on the hustings if it could not be delivered in the time scale provided by the Bill.
The legislation enables parties to formulate their proposals and to judge whether they are able to implement them in the proposed time scale. I am not clear whether

the Conservatives want to delay the implementation of these powers for 12 months or 24 months, but it seems to be more than 12. The amendment is symptomatic of the arguments that we have heard from Conservatives recently. They want to put obstacles in the way of the Parliament assuming the powers in the Bill, and to delay the Scottish people assuming responsibility for a proportion of their own affairs. The sooner the Scottish people are able to exercise their discretion over these matters of policy the better. I have no time for amendment No. 366.
The hon. Member for Beaconsfield referred to the need for gradual change. Some of us are concerned that gradual change has been slow in coming. The people of Scotland have decisively voted for the Parliament to be set up on this basis, so we should not impede it from assuming the powers that it was promised.

Mr. McAllion: I did not want to speak in this short debate, but I felt that the Conservative Front-Bench contribution required a response from Back Benchers. I regard the hon. Member for Beaconsfield (Mr. Grieve), who has been elevated to the Front Bench, as one of the brightest and best Opposition Members—certainly given what he has said during our debates on the Bill—but, when he cannot even tell the difference between the year 2000 and the year 2002, assuming that it is 12 months, we have to worry about the quality of the Conservative party and the likelihood of its returning to office. It is clear that even the brightest and best cannot count. But perhaps the Conservatives have an aversion to counting following the last general election, when results went badly against them.
Let us consider the substance of the debate. Hon. Members want the elected Scottish Parliament to be able to introduce a Budget in the first year in which it takes over—a distinctive Budget: the Budget of the Scottish Parliament, rather than simply a Scottish Office block that is decided here and handed down. They want a definite budget, which will draw its strength from the mandate received by Members of the Scottish Parliament from the Scottish people.
I cannot see the purpose of the amendment, other than dog-in-the-manger opposition to what the Scottish people have already voted for. A referendum has taken place, and a huge number of Scottish people voted to give the Parliament a tax-varying power. The Parliament will be elected in May 1999; there will be almost a "shadow" year during which it can come to terms with the new responsibilities that it will take. In that time, accountants and tax lawyers will be able to engage in consultations with the Parliament on what its first Budget may entail. But if the parties elected to that Parliament have been elected on the basis of a manifesto that states that it should vary the rate of income tax in Scotland—whether by 1p, 2p or 3p—by increasing it, that is democracy, and the Scottish Administration will have the right to introduce such a measure in their first Budget.

Mr. Grieve: I take in good part the hon. Gentleman's views about my mathematical abilities, but let us confine ourselves to the principle for a moment. Surely the issue is not the Scottish Parliament's ability to deal with the matter; surely it is the fact that all the other associated


bodies in Scotland—and the people, and the accountants, and everyone else—will have to prepare for the change. That is not a political but a practical issue, and that is why we sought the postponement.

Mr. McAllion: I understand that, since 11 September 1997, it has been clear to everyone in Scotland that the change is about to happen. That means that there are two and a half years in which to prepare for the change before the Scottish Administration introduce their first Budget in April 2000. I do not see the need for us to allow the extra two years that the Conservatives are suggesting. The fact is that they do not like the change: they would prefer the Scottish people not to have voted for it, and they would prefer the Scottish people to elect to the Scottish Parliament a party committed to not implementing it. That, however, is up to the Scottish people. It is not up to amendments tabled in the House of Commons to prevent the Scottish people from electing a party that will introduce the changes contained in its manifesto.
In an earlier debate, someone said that the proportional representation election system—which might lead to a coalition Government here—would lead to taxes being increased through the back door against the wishes of the Scottish people. Hon. Members seem to misunderstand the nature of that system. It means that, unless more than 50 per cent. of people back the Administration, that Administration will not be able to increase taxes in the Scottish Parliament.
It is almost like the old ladies in the Carlton club who said, when they heard in 1951 that a Labour Government had been elected with an overwhelming majority, "The country will not stand for this." They did not understand that the country had just voted for a Labour Government. The Tories have not yet understood that Scotland as a country has voted for a Scottish Parliament with tax-varying powers, and may well vote for parties that will use those powers when they are in government. There is no reason on God's earth why any hon. Member should stop or delay the exercise of democracy in Scotland. That is what devolution is all about.

Mr. Ancram: The hon. Gentleman is always very keen to bring my hon. Friends and me to task when we get things wrong. Will he tell us again who were elected to office in 1951?

Mr. McAllion: I believe that the Conservative party was elected, following the policies that a Labour Government had produced in 1945. If I remember rightly, the Conservatives adopted those policies lock, stock and barrel—much as new Labour has done with Tory policies.
The point that I am trying to make is that, under a system of democracy, the people decide how taxes should be levied in their country. That is why I am keen for my hon. Friend the Minister to oppose amendment No. 366, which I consider anti-democratic and very much in the nature of the Conservative party as it has been for the past 25 years. Sooner or later, the Conservatives will have to learn the lesson that they cannot continue to preach to the Scottish people that they do not know what they are doing, and that if they vote for tax-varying powers there is something wrong with them. Of course there is not; there is something wrong with the Conservative party,

if it cannot accept the decision of the Scottish people and continues to try to oppose it in the House of Commons with useless amendments such as this.
As for amendment No. 408, I do not agree that a Scottish Parliament should operate in the same way as this Parliament. Here, the Executive has the right to raise taxes, but the Opposition can move motions only for reductions in taxes. I did not know before that that was the position here, but it is, and I hope that it will not apply in the Scottish Parliament. I feel that Committees in the Scottish Parliament should be very different from Committees in the House of Commons, and that the nature of sovereignty in the Scottish Parliament should be very different from the operation of sovereignty here. I do not want an all-powerful Executive in the Scottish Parliament that will do much as it pleases, like the Executive here. I want powerful Committees that have the right to initiate legislation.
I do not see why the Finance Committee, or its Chairman, should not be able to propose an alternative Budget. If the Budget can gain the support of Members of the Scottish Parliament, what is wrong with that? It is a different way of working from the way in which this Parliament works, but surely, for goodness sake, as we enter the next millennium we can move away from the 19th-century ideas that dominate the operation of this Parliament. Surely we can move into the new millennium along with the rest of the world, rather than being locked in the 19th century.
I do not think that my hon. Friend the Minister should accept either amendment. Both are intended to interfere with the rights of the Scottish people to govern themselves.

Sir Robert Smith: Yet again, the hon. Gentleman fails to understand that, without our amendment, the arrangements will be even more restrictive than those governing this place. The Government propose that only the Executive can do anything when it comes to tax powers; we seek, at least in part, to widen that ability to the whole Parliament.

Mr. McAllion: I did not understand that. I am grateful to the hon. Gentleman for drawing it to my attention: if I had known that that was what the Government were about, I might have made a very different speech. [Interruption.] My hon. Friend the Minister, however, assures me that that is not the case, and, as he is such a nice man, I am prepared to trust him, if not others.

Mr. Salmond: The hon. Gentleman keeps referring to 19th-century practices in this place. Does he not think that that is a bit unfair? I cannot remember anything quite as modern as the 19th century here.

Mr. McAllion: I think that this place had its heyday in the 19th century. In those days, there was a coherent set of principles to which both Government and Opposition adhered—liberal capitalism. The 20th century produced different views about how society should be organised, and the emergence of the Labour party. I rejoice in such differences, however, because they continue to divide


Government and Opposition. I resent the idea that we should all come together again in one big consensus and accept the new world order, the new capitalism and so on.

The Chairman: Order. The hon. Gentleman is going well wide of the amendment, in a debate that allows a limited amount of time.

Mr. McAllion: I am indeed going dangerously wide of the amendment, so I shall return to it.
If amendment No. 408 increases the powers of the Scottish Parliament over the Executive, I ask my hon. Friend the Minister to accept it. If it does not, I ask him to reject it.

Mrs. Laing: First, let me correct something that was said by the hon. Member for Dundee, East (Mr. McAllion).

The Chairman: I hope that it is something that was in order.

Mrs. Laing: It was not absolutely in order, Sir Alan, but the hon. Gentleman is way ahead of his time if he thinks that there are any ladies in the Carlton club.

The Chairman: Order. I gave the hon. Lady a hint, and I think that she should have taken it.

Mr. Salmond: There are women in the Tory party.

Mrs. Laing: The hon. Gentleman makes the point very well.
Let me turn to clause 70(5). With all due respect to my hon. Friend the Member for Beaconsfield (Mr. Grieve), I must agree with the interpretation of the hon. Member for Edinburgh, West (Mr. Gorrie) of his amendment. It seems to me that to change the words
only a member of the Scottish Executive may move a motion for a tax-varying resolution
to
only a member of the Scottish Executive may move a motion for a tax-increasing resolution
is a good idea, because it suggests that any other Member of the Scottish Parliament can propose a tax-reducing resolution. The amendment is good because only a Conservative Member of the Scottish Parliament is likely to move a tax-reducing resolution. History shows that only Conservatives aim at reducing taxes. Of course the amendment will be irrelevant when Conservatives control the Scottish Executive, and I am confident that they will.

Mr. Salmond: The Tory amendment delays any attempt to reduce taxes for another two years, and, in opposing the Liberal Democrat amendment, the Conservatives seek to delay a Conservative Opposition's ability to reduce taxes. It seems that Conservative Front-Bench spokesmen do not think that they will reduce taxes in government or in opposition and that implies that they do not think that they will be there at all.

Mrs. Laing: I understand the hon. Gentleman's point, but his interpretation is wrong. There is complete consistency in our attitude to the two amendments.

Amendment No. 366 to change 2000–01 to 2002–03 aims to give a degree of certainty and stability to the Scottish people. Despite the way in which they voted in the referendum, the Scottish people do not deserve to have their tax and financial affairs and their political background changed every month or so.

Mr. Ancram: My hon. Friend makes interesting comments. I have some difficulty working my way through the double negative in the Liberal amendment. Does my hon. Friend agree that it is a typical example of a woolly Liberal Democrat amendment? Would not it have been much easier to say that Standing Orders shall ensure that any Member of the Scottish Parliament may move a motion for a tax-decreasing resolution? That would have been totally clear.

Mrs. Laing: I entirely agree with my right hon. Friend; it would have been much clearer. However, I give the Liberal Democrats some credit for doing the best that they can in the circumstances. Perhaps they do not have the faith to imagine that anyone will ever want to propose a tax-decreasing resolution. I certainly cannot imagine any Liberal Democrat introducing such a measure.

Mr. McLeish: I shall respond first to the questions that were posed by my hon. Friend the Member for Linlithgow (Mr. Dalyell). He asked about the combined effect of clause 70(3) and (4) to allow a Scottish rate to be applied retrospectively. The Law Society of Scotland made that point and the degree of retrospection that it suggested is not possible. I want to give my hon. Friend and the Law Society of Scotland a more detailed answer. My hon. Friend also asked about double tax treaty relief. Double tax relief credits will be allowed against income tax that is paid by Scottish taxpayers at any varied rate that has been determined by the Scottish Parliament.
Amendment No. 408 would indirectly, through the mechanism of Standing Orders, allow a resolution to lower income tax in Scotland to be moved by any Member of the Scottish Parliament while any tax-increasing resolution could be moved only by a member of the Scottish Executive. I do not accept that there is any logic in distinguishing between the process of moving tax-increasing or tax-reducing resolutions. The key point of principle is whether tax resolutions that are to be considered by the Scottish Parliament should be moved only by members of the Executive or whether it should be open to any Member of the Scottish Parliament to move such a resolution.
In reaching a decision on these matters, we have been guided by the Westminster model and by the need for the Executive to maintain control over the sources of their income. For example, the Bill does nothing to prevent general tax relief motions being discussed and voted on in the Parliament. I have had to truncate my response, but what I have outlined seems a sensible, pragmatic approach while the proposal in amendment No. 408 would be less so. I ask the Committee to reject that amendment.
Amendment No. 366 would effectively prevent the tax-varying power being exercised before the financial year 2001–02. If Labour were the governing party in the Scottish Parliament it would not use the tax-varying power during the lifetime of the current UK Parliament, which may take us to 2002–03. However, that is not a reason for statutorily preventing the Parliament from


exercising the power in its first full year of operation, not least because I am not prepared to pre-judge the Scottish electorate's decision in the forthcoming Scottish parliamentary elections. It will be for each of the Scottish parties to make its proposals on tax and it will be for the voters to decide on which party and, therefore, which tax policy they wish to see. The Westminster Government should not deny the Scottish electorate that choice until 2002. I urge the Committee to reject the amendment. The Government are on target to make sure that the requisite provision is in place by 6 April 2000.

Mr. Gorrie: We do not accept the Minister's argument, but the issue is not of such substance that we wish to push the amendment to a vote. Perhaps the hon. Member for Dundee, East (Mr. McAllion) is right and we should have had a more far-reaching amendment.
It being a quarter to Eight o'clock, THE CHAIRMAN, pursuant to the Order [13 January] and the Resolution [this day], put forthwith the Question already proposed from the Chair.
Amendment negatived.
THE CHAIRMAN then proceeded to put forthwith the Question necessary for the disposal of the business to be concluded at that hour.
Clause 70 ordered to stand part of the Bill.

Clause 71

SCOTTISH TAXPAYERS

Mr. Swinney: I beg to move amendment No. 344, in page 30, line 32, leave out 'year of assessment' and insert
'complete year of assessment following the passing of this Act.'.

The Chairman: With this, it will be convenient to discuss the following amendments: No. 370, in page 30, line 33, after 'individual', insert
'other than an unincorporated small business'.
No. 336, in page 30, line 35, leave out from 'Kingdom' to end of line 36 and insert
'in which he has his principal United Kingdom home'.
No. 337, in page 30, line 37, leave out 'who'.
No. 338, in page 30, line 39, leave out
'has his closest connection with Scotland during that year'.
No. 339, in page 30, leave out lines 42 to 44.
No. 371, in page 31, line 6, leave out 'principal'.
No. 372, in page 31, line 6, leave out from 'Scotland' to end of line 7.
No. 340, in page 31, leave out lines 8 to 11.
No. 373, in page 31, line 8, leave out 'principal'.
No. 374, in page 31, line 10, leave out 'principal'.
No. 341, in page 31, leave out lines 12 to 17.
No. 376, in page 31, leave out lines 13 and 14.
No. 343, in page 31, line 17, at end insert-
'(c) an individual whose principal home is not in Scotland, but whose work shift patterns require him to be habitually working through the night in Scotland, shall not be deemed to have spent a day or days in Scotland for the purposes of this section.'.

No. 377, in page 31, line 18, leave out 'principal'.
No. 378, in page 31, leave out lines 21 to 24.
No. 342, in page 31, line 24, at end insert—
'(5A) In subsection 5(b) above, "main place of residence" in relation to an individual is defined as being the place which is his habitual or family abode, his permanent home, or the residence with which he has the closest personal or economic relations.
(5B) In determining any issue arising from the definition of an individual's main place of residence, reference shall be made by the Board or by any court or tribunal to the OECD model double taxation treaty.'.
No. 379, in page 31, leave out lines 25 and 26.
No. 414, in page 31, line 26, at end insert 'but excludes an oil rig'.

Mr. Swinney: I notice that the right hon. Member for Devizes (Mr. Ancram) and his hon. Friends support amendment No. 341. As a member of a minority party in this place, but not a minority party in Scotland, I am always grateful for support, but the right hon. Gentleman can speak to that amendment for himself.
I heard over the weekend that the Secretary of State for Scotland is worried that some people may want to destabilise the Scottish Parliament. I also have concerns that the Parliament may be destabilised, not by forces from within my party, because we want the Parliament to succeed, but by the Government not taking full and genuine account of the real difficulties that the legislation will create. Our amendments in this group are designed to strengthen the Parliament by creating a clear and uncomplicated base on which it can found its actions.
The clause and the amendments seek to define who should pay any different rate of taxation that is applied by the Scottish Parliament. The Government propose that those who are resident in the UK for tax purposes and have their closest connections to Scotland should pay any different taxation that is levied by the Scottish Parliament. To define that closest connection, the Government propose to establish a days test that sets out to determine how many days a person spends in Scotland. If he spends more days in Scotland than in the rest of the UK, he will be eligible to pay any different rate of tax.
In addition, the Government rightly propose that Scottish Members of the Westminster Parliament, Scottish Members of the European Parliament and Members of the Scottish Parliament will also have to pay. It might be worth trying to add to the net Members of this Parliament who speak repeatedly on Scottish matters. By that device, Scotland might at least receive some modest compensation for some of the things that are said by the right hon. Member for Devizes and his hon. Friends.
My concern with the Government's proposals is that they are a sledgehammer to crack a nut. It is difficult to work out exactly why they are taking the steps that are set out in the clause. I assume that they are trying to create a clear mechanism that can withstand attack either politically or by tax avoidance. The Government are prepared to countenance different tax regimes in the United Kingdom and should bear in mind the fact that there is likely to be uncertainty about who pays.
That is nothing new. Each year, band D council tax payers in the village of Meigle in my constituency pay £730 in council tax to Perth and Kinross council. A couple of miles along the road, band D council tax payers in the first farm cottages in the Angus part of my constituency


pay £670 in council tax. I do not detect many of my constituents contemplating moving that short distance to be relieved of a higher band D council tax, and the Government are perfectly happy to have a situation where different council tax rates are part of the fabric of decision making in the UK.

Mr. Wallace: Is the hon. Gentleman absolutely sure that some of his constituents in Perth and Kinross have not moved into Angus to set up a pub, on the same basis as people seem to be teeming into the constituency of the hon. Member for Westmorland and Lonsdale (Mr. Collins)?

Mr. Swinney: In the tradition of hon. Members representing North Tayside, I do not spend much time in pubs, so I cannot substantiate the hon. and learned Gentleman's point, but I shall certainly devote considerable time to finding out whether there is any demand.
The Government may be trying to create a mechanism by which any leakage of taxation due to the Scottish Parliament is obstructed. I suspect that they are trying to put obstacles in the way of individuals who move home from south Scotland to north England to avoid any additional taxation that is levied in Scotland, where they continue to be in employment. If so—I should be interested in the Minister's argument about the Government's motivation—the Government are using a sledgehammer to crack a nut.
The maximum additional tax burden that is envisaged under clause 69 is £660 per person in each tax year of assessment. Conveyancing, transportation and refurbishment costs of moving from Scotland to England to avoid any additional tax burden seem fairly excessive when placed alongside a maximum additional tax burden of £660. The number of cases—this is an absolutely fundamental point—to which the exercise of tabulating the days spent here and there will be relevant, will be utterly insignificant, but I fear that, in setting the legislation off in that direction, the Government will place a substantial burden on many, if not all, businesses and individuals, who will be asked to establish for themselves the means, methods and, inevitably, costs of proving that they are, or are not, affected by the test.
A very small number of people are likely to be affected, but I suspect that, invariably, all potential Scottish taxpayers will have to have sufficient information and documentation to prove whether they are eligible for the test. I therefore hope that the Government will think again about the provision and accept that there is a simpler way in which to define who should be in the Scottish Parliament's tax net.
The amendments that have been tabled by my hon. Friends and me are designed to change the test on whether an individual is liable to pay any additional taxation, based on the individual's principal UK residence. We aim to make the test fairly easy to undertake. We have included in our amendments, specifically in amendment No. 342, the characteristics of the definition that could be formulated. We suggest that terminology such as
habitual or family abode, his permanent home or the residence with which he has the closest personal or economic relations
would be of benefit in establishing the rules that lay down the meaning of principal UK residence.
Amendment No. 342 also refers to the Organisation for Economic Co-operation and Development model double taxation treaty. That reference is designed to give the authorities that are responsible for determining the collection of any tax that is separately set by the Scottish Parliament appropriate guidance on definitions and when they have to seek alternative opinions on whether individual cases comply with the legislation's definitions. In that respect, I should fully accept it if the Government wished to take away the amendments, to reflect on their contents and to discuss them more widely with the industry to arrive at an absolutely watertight definition, but our amendments try to reach the best possible definition.
One of the problems with the Government's proposal of "closest economic connection" is that it is a new tax term which has no established standing in the body of tax law. Having worked my way through many of those definitions during a previous life with Scottish Amicable and having ploughed through the double taxation treaties between the UK and various European states, I am thoroughly of the opinion that we do not need any new tax terms to add to the litany of others in policy and guidance.
On amendment No. 343, in the event that the Minister is not persuaded by my arguments about removing the days test, I raise one particular anomaly that must be addressed by the Government. According to the definitions in the Bill, an individual who lives in Carlisle but who works in Dumfries—I am glad to see the hon. Member for Dumfries (Mr. Brown) in the Chamber—will not be eligible to pay any additional taxation in Scotland because he or she will be deemed not to have spent a day in Scotland, according to the rules of the Bill.
According to my understanding of the clause, that analysis is okay so long as the person is a day-shift worker. If the person is a night-shift worker, he or she will start and finish the day in Scotland and, according to the rules, will be eligible to pay additional taxation, if it is levied. I am sure that the Minister will ask me to give the number of cases to which I refer, along with an explanation of the number of publicans in Scotland who are planning to reside in Westmorland, but I do not have an answer. However, I respectfully ask the Minister if he has an answer to my question: how many people will be in the net of the days test?
Amendment No. 343 would expressly deal with the anomaly that I have raised. It may not seem like a big issue, but I doubt whether it is of any less significance than the scope of the days test that has been constructed by the Government as a unique part of this legislation.
I hope that the Minister will thoroughly address the issues that I have raised and which will, I am sure, be raised by others. In doing so, will he specifically set out the position of offshore workers in relation to the days test? I simply cannot work out the answer to that point.
There is a danger that the Government, in their zeal to close loopholes, to answer every dilemma, understandably, to knock back every pedantic Conservative attack on their Bill and to ensure that they have thought of everything, pass into law some points that have the sniff of complexity and bureaucracy around them. This clause is an example of that. I hope that the Government will recognise that the amendments have been tabled to assist in addressing practical difficulties in implementing the Bill. They are designed to try to


minimise needless bureaucracy that will be faced by individuals or businesses in trying to comply with the Government's tests. The amendments have been tabled to strengthen and to clarify the legislation and I hope that the Government are able to respond to them in that way.

Mr. Dalyell: The hon. Member for North Tayside (Mr. Swinney) and his Scottish National party colleagues have done the Committee and the discussion of the Bill a service by tabling these important amendments on the tax net. Following up immediately his point about the North sea, I shall ask a direct question. What about the person who works on an oil rig? Will the North sea be considered, in terms of clause 111, as "adjacent to Scotland"? There is a legal problem here, and perhaps tonight would be the time to clarify it.
What is the position of a Scottish soldier who has married quarters, let us say, in Arbroath but who served six months in Northern Ireland and three months in Catterick, Pirbright or somewhere else in England? What are the implications for him in terms of tax-raising powers? The whole issue of service men, who, by the very nature of their job, move around, has to be clarified.
There is the question of holidays. If a person takes his or her holidays abroad in the first part of the year, that could make that person into a Scottish rather than a UK taxpayer, if there is no principal home in England. It may seem that I am being pedantic about all this, but may I refer the House to my question to a former Prime Minister? I asked him to
ensure that legislation presented to this House is not drafted in obscure language.
He replied:
I have every sympathy with the hon. Member's objective. However, I am afraid that, in order to achieve precision in legislation which is complex and often technical, it is not always possible to avoid an impression of obscurity.
To which I replied:
I accept the fact that the Parliamentary draftsmen must try to prevent those who would pretend to misunderstand from doing so, but is it not also important that we laity should understand legislation?
The Prime Minister—Harold Macmillan—gave a classic and well-remembered reply, which gave me my comeuppance:
I know that this is a difficult problem. I would remind the House of the very wise words of Sir James Stephen, one of our greatest authorities, who pointed out that since legislation is often the subject of litigation it is absolutely necessary not only that it should appear to be simple to those who read it in good faith, but actually precise. That is a very difficult art. Many things are simple. Let us take the sentence: 'When John met his uncle in the street he took off his hat.' That is a clear sentence, but it is capable of at least six different meanings.
Those were the days when Prime Minister's questions were heard in total silence. He continued:
The point about legislation is that the courts have to interpret it in litigation based upon it, and it is therefore essential that it should be not so much simple as precise.
I think that that is the difficulty with clause 71.
8 pm
My friend—and he really was my friend—the late Brian O'Malley followed up my question with a question on the explanatory memorandum to a Finance Bill. The Prime Minister replied:
I have every sympathy with the purpose of the hon. Gentleman. I think that Finance Bills dealing with a large number of subjects and sometimes fairly simple provisions seem very complicated. What we tried to do in 1962, where there was a fairly complicated provision, was to issue a special White Paper to explain that particular part. Other Finance Bills are fairly simple and involve the raising or reduction of the Income Tax or something of the kind. Therefore, I take account of what the hon. Member says.
So it went on, with a final question from the then shadow Chancellor, James Callaghan:
Has the Prime Minister looked at the Finance Bill this year to see that it took us nearly 20 Clauses and seven Schedules to get rid of Schedule A? Would not that have been a very appropriate subject for an explanatory memorandum?"—[Official Report, 4 July 1963; Vol. 680, c. 583‒85.]
The reason I have gone into such detail is that things have not altered all that much. We must take into account the fact that lawyers will try to extract every single penny possible from legislation. My fear is that the interaction between Holyrood and Westminster will be a lawyers' paradise.
I want to ask the Minister about the briefing that his advisers will have had from the Law Society. It states:
With regard to Clause 71(1) the present position for UK tax is that strictly an individual should be taxed in the UK on the whole income of a year of assessment although only present in the UK for part of the year but under Extra Statutory Concession (A11) such a person is only taxed on income for the part of the year during which he is actually resident in the UK. There is, however, no provision for splitting the tax year in the Bill and it is submitted that this would be helpful since, without such a provision, for example, it appears necessary for an English employer of a Scot moving to England, say, in the second half of the tax year to operate PAYE at the Scottish basic rate for the whole year or if moved from England to Scotland after 1 month of the tax year would have to collect the Scots tax on English earnings of that month.
That may seem very dry, but in reality it is basic and very important. The Scottish Office has had notice of the matter from the Law Society and I expect some sort of response this evening.
The briefing continues:
In respect of Clause 71(2)(b) it is suggested that time spent in Scotland alone is not a sufficient test if someone has his or her principal residence in other parts of the UK. For example, if a tax payer, having his own principal residence in England, but living in the Borders with family a few miles away, but across the Border, visits Scotland each weekend, arriving Friday and departing early Monday, and all public holidays and annual leave were spent in Scotland it might only require a fairly short additional period (say, 15 weeks) of work, perhaps as a Sales Representative or otherwise in Scotland to be subject to Scottish tax and vice versa in reverse for Scottish residents. It is suggested that there could be a number of people in this situation, e.g. professional sportsmen, particularly in the Borders area. who might, somewhat inadvertently, find themselves subject to Scottish tax and might not realise that were the case, which could have penalty consequences under the Self Assessment regime.
Those matters are nuts and bolts, but they are not unusual nuts and bolts; they are practical.
The briefing continued:
In relation to Clause 71(2)(b) and (3), Inland Revenue leaflet (IR20) states that a visitor to the UK is treated as resident in the UK if physically present in the UK for 183 days of any tax year. The


result of Clause 71(2)(b) and 71(3) could be that a foreign visitor might be subject to Scottish tax if in Scotland for only 92 days out of that 183 test period, whereas a permanent resident of another part of the UK coming to Scotland would have to spend 183 days in Scotland before being subject to Scottish tax.
It is suggested, therefore, that the definition of 'Scottish tax payer' should exclude persons ordinarily resident abroad unless in Scotland for 183 days to prevent foreign visitors being discriminated against.
Do the Government accept the Law Society's view? If not, why not?
I have spoken at length to both the Law Society and the Institute of Chartered Accountants. The ICA says:
Clause 71(1) indicates the requirements to be met by a 'Scottish taxpayer' and hence who is liable to pay the Scots income tax. This is based upon the test of 'residence' which is a recognised test in deciding whether an individual has a liability to UK income tax. If the test of residence is met, a taxpayer will be liable to Scots income tax throughout the fiscal year. However, if a 'Scottish taxpayer' moves permanently to, say, Wales in October should his new Welsh employer be required to withhold Scottish tax under PAYE?
The ICA thinks not. It recommends that
the existing Extra Statutory Concession A11 should be included in the law to ensure that a person is only taxed on income for the part of the year during which he is actually resident in Scotland.
What do the Government say about that?
The ICA continues:
Although it may be simpler to apply the 'Scottish taxpayer' test of residence for a whole fiscal year, it will add to the complexities of PAYE for those who move to other regions. To this end we trust that proposed guidance on the operation of an 'S' code for PAYE will be issued at an early stage for consultation with employers and other interested parties.
As a matter of interest in 71(1)(a) is 'an individual who … is treated as resident in the UK' the same as an individual who is actually resident? We do not think so.
I want to know what the Government think. This will be a matter for litigation; it will be a field day for lawyers unless the issue is clarified.
On clause 71(3)(b), the ICA says:
One test in defining residence in clause 71 is whether an individual has his 'principal UK home' located in Scotland. This does not fit particularly well with the capital gains tax definition of principal or main residence.
People who are subject to capital gains tax legislation can afford very good tax lawyers. Tax lawyers will make a meal of the provisions unless they are cleared up.

Mr. Wallace: Does the hon. Gentleman think that people will engage tax lawyers to make a meal for, at most, £660 a year?

Mr. Dalyell: From my experience of Finance Bills, what tax lawyers and their lobbies can do is amazing. I am a relative layman in such matters, but I have experience of several Finance Bills. I do not know whether the hon. and learned Gentleman has served on Finance Bill Committees.

Mr. Wallace: I have.

Mr. Dalyell: Then the hon. and learned Gentlemen must know what difficulties can be raised.
The ICA brief continues:

Equally clause 71(4)(a) uses a test for an individual's day of presence which is not the same as that used for a UK test of residence and other related tests. The UK test is whether one is present at midnight whereas this test would treat one nonetheless as being present in Scotland. For example, if a person takes a morning flight to Brussels and stays there for two nights, then returning to Scotland using this test the person is out of Scotland for 1 day but in terms of s. 193 ICTA 1988 out of the UK for 2 days.
How are definitions to be made the same as those used in tax legislation to prevent unnecessary disputes?
The final point covered by the ICA brief is appeals. It says:
Under the existing residence rules questions about a taxpayer's status can frequently take considerable time and expertise to negotiate. This involves both the Inland Revenue and the taxpayer in a relatively expensive process. To ensure as efficient a process as possible, particularly when only 3 per cent. of some income is at stake, we trust the Inland Revenue will establish a central processing unit at, for example, FICO Scotland.
Those are all seemingly dry details. They amount to what some of us have called the dewiring of the United Kingdom. During the debates on Welsh devolution, my right hon. Friend the Member for Llanelli (Mr. Davies) has repeatedly talked of the unbundling of the United Kingdom. They are the difficult issues that have to be dealt with. They may seem dry, but they are very important and will be the source of endless litigation and trouble if we do not sort them out.

Mr. Ancram: The details that the hon. Member for Linlithgow (Mr. Dalyell) has referred to may sound dry, but they are vital. He revisited a kinder, gentler time in the House of Commons when questions were answered and debate was real. If he is looking for a lack of obscurity in legislation after 34 years, I fear that he will have to wait a lot longer.
The points that the hon. Gentleman has made are important because the arguments about whether someone is liable to pay tax are centred not on how many people will pay but on whether it is fair that they should pay. The hon. and learned Member for Orkney and Shetland (Mr. Wallace) asked whether anyone would go to a tax lawyer over a sum as small as £630 or so. That is an extraordinary suggestion. We cannot decide whether someone is being rightly or wrongly taxed on the amount that they are being asked to pay. That is the Leona Helmsley line—only the little people pay taxes.
The hon. Member for North Tayside (Mr. Swinney) said that he thought that we support one of his amendments. He may find that we are supporting part of his amendment. We are not on all fours with him. I have also found that the amendment paper describes me as a doctor in some places. I assure the Committee that I have not taken medical qualifications. I leave that expertise to my hon. Friend the Member for Woodspring (Dr. Fox).
The hon. Members for Linlithgow and for North Tayside have rightly pointed out that the issues that we are debating will determine whether the system of taxation will work fairly. We talked earlier about the complexities of collection. We must have a clear definition of who pays. There must be no areas of doubt or confusion. I have told the Minister of my disappointment at his knocking back of every amendment. I hope that he can cast aside his prejudice on these amendments and think seriously about the impact on the Bill of leaving the confusion that exists at the moment.
8.15 pm
Amendment No. 370 is slightly different from the other Conservative amendments in the group. It would prevent businesses in Scotland from facing a different tax regime from those in the rest of the United Kingdom. That was the clear aim of the White Paper. If I have read the complicated Inland Revenue paper lodged in the Library this afternoon correctly, it confirms the impression given in the Bill that unincorporated small businesses would be liable to pay any additional tax raised by the Parliament. The Inland Revenue paper refers to partnerships in particular. Sole traders and partnerships appear to receive different treatment from incorporated businesses. It cannot be fair that payment of the tax depends on whether a trader is incorporated. I hope that the Minister will consider the amendment carefully and will be able to accept it in principle. I am always prepared to accept that my drafting may not be perfect, but I should be delighted if he is able to promise serious consideration of it.
We run into difficulties with the definitions of the terms used in the Bill. Phrases in clause 1 such as "principal home", "places of residence" and "main place of residence" have not been used before in United Kingdom income tax legislation. A recent paper by Deloitte and Touche confirmed that. There are uncertainties about definitions. We can all pull out examples. Under the Bill, an employee of a Scottish company who owned a house in Edinburgh but was seconded to London for one year, where he stayed in a rented flat, would presumably be considered a Scottish taxpayer because his principal home was in Edinburgh, even though he performed no duties of employment in Scotland during that period. That immediately raises a substantial question about fairness and the grounds for taxation. I hope that the Minister will look closely at the terms.
Amendments Nos. 371, 373, 374, 377, 372 and 378 are probing amendments. We are trying to find out what is meant by the terms, to understand how the tax will impact on individuals. I hope that the Minister will explain why new terminology has been sought. If ever there has been a field day for lawyers, it is when legislation uses new terms of which there are no definitions in existing law. I suspect that lawyers are rubbing their hands in anticipation and planning their holidays in exotic parts of the world as a result of the work that will stem from the Bill.
Let us consider the example of a Scot whose family home is in Scotland but who is transferred to the London office of his company. Not wanting to move his family south, he spends his weekends in Scotland. Those of us who travel on the aeroplane see such people flying down to London on a Monday morning and returning on a Friday evening. Under the Bill, the Monday and the Friday will be counted as days in Scotland, even though the man is working in London on those days. He will be deemed to have spent four of the seven days of the week in Scotland, even though he spent five days of the week working in London. Even though his work is entirely outside Scotland, he will be liable to pay Scottish tax. Amendment No. 376 is an attempt to deal with what we regard as a patently unfair situation.

Mr. Swinney: The right hon. Gentleman is citing a number of examples of what could loosely be characterised as a fancy life style, which involves flying to London every week. Construction workers, for example,

might live in the north of England and travel to work every week on a site in Glasgow or on the A74, if it is ever improved. They would be liable for the Scottish tax if they worked there for a prolonged period.

Mr. Ancram: I take the hon. Gentleman's point. If they were working on a construction site in Lanarkshire but travelling home to England every night, they would not pay unless they were working the night shift, in which case they would.

Mr. Swinney: But if they were living in digs?

Mr. Ancram: That is the sort of anomaly that arises, and it is important to highlight such examples. These cases may not be many, but the Minister would surely want to prevent even one case of the tax being wrongly or unfairly levied.
I do not travel to Scotland as often as I used to when I was a Scottish Member of Parliament—I sometimes used to go up two or three times a week—but I came down on an early morning flight today. It was packed with people coming to earn their living in London during the week who will travel back on Friday evening. Although they spend five days of the week in London, they will be deemed to be resident in Scotland and as having spent four out of seven days there. That seems to defy logic, and I hope that the Minister will consider the problem.
Let us consider the issue of multiple presence. The Deloitte and Touche paper produced two examples in this regard, both of which are relevant. The first related to someone who had a home in England but spent 121 days in Scotland, 121 days in England and 123 days in France. Such a person would be liable to Scottish tax because he would be a UK resident and would have spent as much time in Scotland as in another part of the United Kingdom, although he had in fact spent 244 days outside Scotland. Again, that seems to create extraordinary anomalies.
The second example is perhaps even more graphic. It involves someone who lives in Glasgow and has a house there for 180 days of the tax year. He then moves to London where he lives for the rest of the tax year. He will not be liable to Scottish tax because his period of residence in England exceeds that in Scotland. However, if instead of moving to London he moves to France, he will be liable for Scottish tax because the number of days spent in Scotland will exceed the days spent elsewhere in the United Kingdom. That is an enormous anomaly for which there is no logical explanation.
The hon. Member for North Tayside mentioned day and night shifts and movements across the border. As I understand it, it is common in Europe to have special rules for cross-border workers, yet there is nothing in the Bill to provide for that. I hope that the Minister will consider the point. We believe that the amendment would solve the problem.

Mr. Wallace: The right hon. Gentleman is making some important points, and it is important to tease out some answers. He cited the example of someone who moves to France rather than London. If that person has spent only 180 days in the UK, would he be treated as a UK taxpayer at all in that year? If not, the question of paying Scottish taxation would surely not arise.

Mr. Ancram: I am not a tax expert, which is why I said the amendments were probing. I cannot answer the


hon. and learned Gentleman, but it is an interesting question because there might perhaps be a conflict between the Bill and the usual tax rules. It is important to avoid that conflict if we are to avoid the complications to which the hon. Member for Linlithgow referred. I appreciate that no legislation is ever perfect—if it were, there would be no lawyers—but it is important to examine such patent anomalies.
Deloitte and Touche also point out that, for overseas workers who are brought into Scotland, the tax may result in considerable extra costs for inward investment companies because those workers are paid on a net pay basis. In other words, a Japanese worker who has a certain net pay after tax in Japan will be guaranteed the same net pay after tax in the United Kingdom. The Japanese company will therefore pay him sufficient gross pay in the United Kingdom to result in the desired net pay after taxes. Were Scotland to have an additional 3p on the basic rate, the gross pay would have to be higher than in England to arrive at the same net amount.
As we know, Scotland is always looking for inward investment and I suggest that the cost to a major new investor bringing in, say, 40 Japanese workers paid on average £25,000 a year could be as much as £40,000. That might he taken into consideration if an inward investment decision were in the balance.

Mr. Swinney: I have studied very closely the material from Deloitte and Touche; I thought that that example was rather weak. I accept that choices will be made at the margin but, in the great scheme of an inward investment decision, £40,000 as the difference between one bid and another will probably not be a major factor.

Mr. Ancram: The hon. Gentleman may be right. It may not be a major factor, but with bids from various parts of the United Kingdom for inward investment becoming increasingly competitive, if £40,000 were the difference, I suspect that it could tip the balance. These matters have to be considered. It is terribly important that we do not pass clause 71 without consideration. When I said at the beginning of today's proceedings that I find this part of the Bill confusing and obscure, I was in large part referring to this clause. It is important that we try to cast some light on it, which is the purpose of the amendments.
Amendments Nos. 379 and 414 refer to employees and passengers on oil rigs and ships and trains. Under clause 71(6), offshore workers on oil rigs, fishing boats and other things will still be liable to pay the tax. Clause 111(1) defines Scotland as including
so much of the internal waters and territorial sea of the United Kingdom as are adjacent to Scotland".
The hon. Member for Linlithgow also made this point. None of us know—at least I do not know—what is meant by "adjacent". Perhaps the Minister will tell us, because it will be crucial to any assessment of whether an oil rig worker or someone who is a passenger on or working on a ship is liable for the tax. It may be a question of a line very carefully drawn somewhere in the North sea.
In the old days of international law, I seem to remember talking about how to draw international boundaries; taking a point from one side of the border to the other and continuing it across the water. Hon. Members who represent Aberdeen—I see at least one here—were,

at least in those days, very interested in where such lines were drawn. Now, however, one's eligibility for tax may depend on something as esoteric as that.
If amendments Nos. 379 and 414 were accepted, they would remove ship and oil rig workers from the tax provision. Indeed, amendment No. 414 deliberately excludes an oil rig in order to achieve that. For many people who work on oil rigs, their only connection with Scotland is flying through Aberdeen airport on their way to the platform, and they could well be coming from elsewhere in the United Kingdom.
The final example that I want to cite highlights the difficulties caused by clause 71. There is a problem in defining what constitutes being in Scotland if one is on a lorry, bus or train. Those of us who occasionally travel on the sleeper know that it leaves Edinburgh at 11.55 pm. Passengers will certainly be liable for tax on the day they board the train, because they will be regarded as having been in Scotland that day, but, under clause 71, I think that they will also be liable for the following day—the train will have left only five minutes before midnight and, for at least 25 minutes afterwards it will be travelling through Scotland on its way to London. Someone who gets on the night train may find that for the day he gets on the train and for the next day he is counted as being in Scotland although he is on the sleeper and is going to work in London.
If the Committee thinks that that is difficult, let us consider the case of the late-night lorry driver who starts his journey from Scotland to the south before midnight. Is he liable for the following day if his vehicle is still in Scotland?

Mr. Swinney: On a point of order, Mr. Lord. I do not want to interrupt the interesting flow of the right hon. Gentleman's speech, but many substantial issues have been raised to which I certainly would appreciate answers from the Minister. I wonder whether we shall have an appropriate opportunity to hear those answers.

The Second Deputy Chairman of Ways and Means (Mr. Michael Lord): It is for the right hon. Gentleman himself to decide what are and what are not substantial issues.

Mr. Ancram: The hon. Gentleman spoke for quite some time at the beginning of the debate and he has just taken a little bit more. I am sure that the Minister realises that these are not just serious issues, but real ones which will arise in future if the Bill is not amended. When they do, they will cause a great deal of consternation and, if we are not careful, there will be much derision about the way in which the system works. We have a genuine chance to clean up the Bill, get it right and make the tax work, so I ask the Minister to examine our amendments closely.

Mr. Wallace: I echo the point that the right hon. Member for Devizes (Mr. Ancram) has just made; it is important that there is as much clarification as possible of who will be liable to tax. However, he may have misinterpreted what I said. The hon. Member for Linlithgow (Mr. Dalyell) created a vision of the courts regularly being filled with huge, expensive litigation.


I did not suggest that that would be the case in respect of individual taxpayers, although that is not to say that it is not an important issue for the individual taxpayers concerned—and there should be as much clarity as possible.
I shall not elaborate on points that have already been raised, but I plead with the Minister to respond positively to the debate and to indicate his willingness to go away and think again about certain points. The one that I would emphasise is that the same test of residence should apply to Scotland as to the rest of the United Kingdom.
I understand that the test of residence in the United Kingdom is whether one is present at midnight. That may not be the case in respect of the Bill. As in the example mentioned by the hon. Member for Linlithgow, someone taking a morning flight to Brussels and staying away for two nights before returning to Scotland would be out of Scotland for one day under the Bill, but out of the United Kingdom for two days in terms of United Kingdom tax legislation. That anomaly will give the tax powers in the Bill a bad name. It is important for those of us who want the tax powers that there is as much clarity as possible.

Mr. Gerald Howarth: I rise briefly to address one of the issues that has given rise to the huge complexities that will result from the Bill. The hon. Member for North Tayside (Mr. Swinney) has done the Committee a service by trying to expose some of the issues, as has my right hon. Friend the Member for Devizes (Mr. Ancram).
I should like to pursue a point raised by the hon. Member for Linlithgow (Mr. Dalyell) in respect of service men, as I represent the home of the British Army at Aldershot and quite a large number of Scots serve in the British Army in various parts of England. The hon. Member for Linlithgow raised an important point about the time that they might spend either at home in Scotland or on duty there. I hope the Minister will address that in his reply to the debate. I shall not trespass too much on his time so that he can answer the detailed questions that have been raised.
Clause 71 raises some important points of law. It will be a lawyers' paradise and there is a grave risk that lawyers will play it off against sections in the Income and Corporation Taxes Act 1988. That will create considerable difficulty for the Inland Revenue and it will certainly add to the costs that the Bill will impose on the body of taxpayers. I shall be interested to hear what the Minister has to say about which law will prevail if there is a conflict and how the courts and judges will interpret between the Bill and that other body of law which already deals with Inland Revenue issues and residence location for tax purposes.
Finally, I return to the point that my right hon. Friend the Member for Devizes made about the train departing at 11.55 pm. That provision could also affect airline pilots who are often required to work away from home. Given that it is a particular feature of the clause that one is caught at the beginning or the end of the day—rather than at a specified hour, such as midnight—the airlines could also be affected. For instance, a shuttle pilot on the route between Heathrow and Edinburgh or Glasgow could find himself spending quite a lot of time in Scotland although his principal residence might be in England. The opposite

could also arise. There should be some consistency, and I hope that the Minister will be able to clear up some of the points that have been raised by Members on both sides of the Committee.

Mr. McLeish: In the 10 minutes that remain, I shall attempt to respond to some of the points that have been raised in an important debate. My hon. Friend the Member for Linlithgow (Mr. Dalyell) asked a number of specific questions. He referred to the Law Society. The Scottish Office and Inland Revenue officials have had a number of useful meetings with the Law Society at which all the main points raised by hon. Members were covered, in most cases satisfactorily.
Professional sportsmen have been mentioned. The example seems a bit far-fetched in my judgment, but in the circumstances described the individual would be a Scottish taxpayer. As far as possible, taxpayers will be informed of their status by the Inland Revenue.
Service men with married quarters—and, possibly, a principal home—in Scotland, who spend six months in Northern Ireland and three months in England might be liable to pay tax on the "principal home" test, depending on the circumstances. However, we are aware of the particular circumstances of military personnel and I am discussing the issues with colleagues.
The point about splitting tax years was addressed when we discussed amendment No. 357. My hon. Friend the Member for Linlithgow also raised the question of the North sea adjacent to Scotland as described in clause 111. Clause 111 confines the boundaries of Scotland for purposes of the Bill to the
internal waters or territorial sea … adjacent to Scotland.
Much of the North sea is outside the 12-mile limit and is not adjacent to Scotland. Further to that, the Government plan to make available to hon. Members during the passage of the Bill a working draft order defining Scottish adjacent waters under clause 111.

Mr. Dalyell: Will my hon. Friend give way?

Mr. McLeish: No. I have very little time in which to respond.
Chartered accountants' comments about individuals being treated as United Kingdom residents under clause 71(1) have been mentioned. We are quite certain that it means the same thing in that context.
The right hon. Member for Devizes (Mr. Ancram) mentioned the example of the business man who flies to London on Monday morning and returns to Scotland on Friday. Such an individual would be a Scottish taxpayer as his family home is in Scotland. The number of days test would not apply.
The substantive amendments relate to the critical issue of who should be liable to pay tax at the varied rate proposed by the Scottish Parliament. Before I deal with them, I should say that the long experience of the Inland Revenue in income tax matters dating back to 1849 has proved invaluable in terms of negotiating us through particularly tricky policy issues.
Drawing up tax proposals is seldom, if ever, a simple matter. Judgments have to be exercised, weighing up and balancing issues of fairness, workability, scope for avoidance, cost of administration and, of course, tax take.


Those judgments have to be informed by in-depth experience and I remain convinced that the Government's conclusions, properly informed by the Inland Revenue, stand up to scrutiny.
Amendment No. 344 aims to link the definition of who will be a Scottish taxpayer to a complete year of assessment and to have it apply only for the tax year 1999–2000—the first full year of the Bill being enacted—and beyond. The amendment is unnecessary on both counts because clause 71 already relates the definition of who will be a Scottish taxpayer to whole tax years and because clause 70(6) makes it clear that the tax-varying power will not be available for use before the tax year 2000‒01.
Amendment No. 370 would appear to be trying to exclude small, unincorporated businesses from the definition of Scottish taxpayers. I do not think that it succeeds, but, in any case, I am not persuaded that unincorporated businesses should be exempt from the tax-varying power. They do, after all, pay income tax at present and, since the maximum extra tax any individual will pay is £660, exercise of the tax-varying power will not damage small businesses. There is no reason why the self-employed and partnerships should not pay their fair share if others pay income tax in Scotland. They will benefit from exactly the same services provided by the Parliament as employees and other Scottish taxpayers.
Amendments Nos. 336 to 339 and 341 are all aimed at deleting the test whereby a UK resident would be a Scottish taxpayer if he or she spent at least half the tax year in Scotland. There has been a fair amount of comment about the test recently—not all of it, by any means, well informed. We have looked carefully at the test and concluded that it fully meets the requirements of fairness, practicability and cost effectiveness.
Taking into account time spent in Scotland is a fair way of ensuring that all those who might benefit from what the Scottish Parliament has to offer—including how it applies the proceeds of a resolution that increases the basic rate of income tax—should pay the appropriate share of the tax. It is only right that those who spend most of their time in Scotland should therefore pay at the Scottish rate.

Mr. Swinney: Will the Minister give way?

Mr. McLeish: I am reluctant to give way, partly because I want to address some of the important amendments tabled by the hon. Gentleman.
A test based on days spent in Scotland is consistent with tests of residence for UK tax purposes generally. I accept that the test involves decisions about where precisely its boundaries should lie—all residence-based tests do—but most of the examples I have seen quoted, in the Deloitte and Touche paper and elsewhere, are quite clear cut. The clause as drafted already gives the most equitable and practical solution in those cases and I would not wish to change it.
Treating someone as spending a day in Scotland if they are there at the beginning or the end of the day is a necessarily strict test to deter avoidance. The transaction costs of avoidance in the "within UK" context are relatively low and have to be guarded against. Better that than a test with glaring loopholes.
I should stress that there will be no extra costs for employers in operating the "days spent" test. No employer will deduct tax at the Scottish rate unless the Inland Revenue tells them to. As is usual, the onus will be on the taxpayer to get his tax affairs right. That again is consistent with other tax law, including UK residence rules. The costs for the Inland Revenue of ensuring compliance with the rules have been taken into account. The number of taxpayers likely to be caught solely by that test is thought to be relatively small.
Amendments Nos. 371 to 374, 377 and 378 would, when taken together, mean that a person would be a Scottish taxpayer if he had his UK home in Scotland, regardless of whether he lived there at all. Amendment No. 378 would remove the provision that decides which property, if a person has two or more homes, should be regarded as the person's residence for the purposes of the Scottish tax. That could mean that anyone with a place of residence in Scotland, such as a holiday home, could be a Scottish taxpayer.
I hesitate to suggest it, but it smacks uncomfortably of an attempt by the Conservative party to reintroduce by the back door the poll tax on holiday homes—a matter in which the right hon. Member for Devizes is well versed. I am not prepared to countenance that. In practice, however, there must be sensible rules to deal with individuals who have homes in Scotland and elsewhere in the UK. It would not be fair that everyone who had a place of residence in Scotland should automatically be a Scottish taxpayer.
Amendment No. 340 would widen significantly the "principal home" criterion whereby a person could be adjudged to be a Scottish taxpayer. Although I understand that the amendment is linked to the SNP's concern to remove the criterion of "days spent in Scotland" from the Bill, it would in practice create bizarre and unfair effects, and should be resisted. The effect of the amendment can best be illustrated by an example. If the amendment were accepted, a person moving with his family to Scotland on the very last day of a tax year, 5 April, would be adjudged to be a Scottish taxpayer for the whole of that year on the basis of the test at clause 71(3)(a) and (b), because he would have spent part of the year—one day—in Scotland and, for at least part of that year, his principal UK residence would have been in Scotland.
Amendment No. 343 picks up a point raised in the paper published by Deloitte and Touche about the potential liability for the Scottish tax of cross-border night shift workers. That situation was one we had identified when drawing up the proposals, but we reluctantly concluded that the balance of advantage lay with living with it rather than with trying to resolve what may in practice be a non-problem. I shall briefly explain why.
A night shift worker living in England but working in Scotland could become liable for the Scottish tax if he or she clocked up, under the "days spent in Scotland" rule, at least 183 days in Scotland. We have, however, to put that point into some sort of context: we are talking about a very small number of people who commute daily between England and Scotland; very few of these few daily commuters will be night shift workers; and very few night shift workers will spend 183 days, as defined in the Bill, in Scotland. Most night workers do not spend all their year working nights and most have significant time off which, when added to holidays, means that they would fall below the 183 day limit.
I accept that that is not a reason to leave matters as they stand.

Mr. Swinney: Will the Minister give way?

Mr. McLeish: I want to come to the specific point. The question of night shift workers is extraordinarily difficult, but I can tell the hon. Gentleman that the Inland Revenue continues to work on this specific point. We want to discover the extent of the problem as it exists in reality and to find out whether there is a problem to be addressed. I give the hon. Gentleman an assurance that the matter will be examined.

Mr. Swinney: The Minister has said that it is likely that the number of people who will fall into the "days spent" category will be small, but that contradicts his central argument. It is no answer to my amendment about night shift workers—I find his response inadequate.

Mr. McLeish: If one takes a specific group, large or small, and starts to look for potential anomalies in the system, one may find that there are knock-on consequences—
It being a quarter to Nine o'clock, THE CHAIRMAN, pursuant to the Order [13 January] and the Resolution [this day], put forthwith the Question already proposed from the Chair.

Question put, That the amendment be made:—

The Committee divided: Ayes 32, Noes 307.

Division No. 176]
[8.45 pm


AYES


Allan, Richard
Hughes, Simon (Southwark N)


Ashdown, Rt Hon Paddy
Keetch, Paul


Beith, Rt Hon A J
Kirkwood, Archy


Bell, Martin (Tatton)
Michie, Mrs Ray (Argyll & Bute)


Brake, Tom
Öpik, Lembit


Brand, Dr Peter
Rendel, David


Breed, Colin
Salmond, Alex


Burnett, John
Sanders, Adrian


Campbell, Menzies (NE Fife)
Smith, Sir Robert (W Ab'd'ns)



Stunell, Andrew


Chidgey, David
Swinney, John


Cunningham, Ms Roseanna (Perth)
Tyler, Paul



Wallace, James


Dafis, Cynog
Welsh, Andrew


Ewing, Mrs Margaret
Willis, Phil


Feam, Ronnie



Hancock, Mike
Tellers for the Ayes:


Harvey, Nick
Mr. Alasdair Morgan and


Heath, David (Somerton & Frome)
Mr. Donald Gorrie.




NOES


Adams, Mrs Irene (Paisley N)
Bell, Stuart (Middlesbrough)


Ainger, Nick
Benn, Rt Hon Tony


Alexander, Douglas
Bennett, Andrew F


Anderson, Donald (Swansea E)
Benton, Joe


Anderson, Janet (Rossendale)
Bermingham, Gerald


Armstrong, Ms Hilary
Berry, Roger


Ashton, Joe
Betts, Clive


Atkins, Charlotte
Blizzard, Bob


Barnes, Harry
Blunkett, Rt Hon David


Barron, Kevin
Boateng, Paul


Bayley, Hugh
Borrow, David


Beard, Nigel
Bradshaw, Ben


Beckett, Rt Hon Mrs Margaret
Brown, Rt Hon Nick (Newcastle E)





Brown, Russell (Dumfries)
Galbraith, Sam


Browne, Desmond
Galloway, George


Buck, Ms Karen
Gapes, Mike


Burden, Richard
Gardiner, Barry


Burgon, Colin
Gerrard, Neil


Butler, Mrs Christine
Gibson, Dr Ian


Byers, Stephen
Gilroy, Mrs Linda


Caborn, Richard
Godsiff, Roger


Campbell, Alan (Tynemouth)
Goggins, Paul


Campbell, Mrs Anne (C'bridge)
Gordon, Mrs Eileen


Campbell—Savours, Dale
Griffiths, Win (Bridgend)


Caplin, Ivor
Grocott, Bruce


Casale, Roger
Grogan, John


Caton, Martin
Hain, Peter


Cawsey, Ian
Hall, Mike (Weaver Vale)


Chapman, Ben (Wirral S)
Hall, Patrick (Bedford)


Chaytor, David
Hamilton, Fabian (Leeds NE)


Chisholm, Malcolm
Hanson, David


Clapham, Michael
Heal, Mrs Sylvia


Clark, Rt Hon Dr David (S Shields)
Healey, John


Clark, Paul (Gillingham)
Henderson, Ivan (Harwich)


Clarke, Eric (Midlothian)
Hepburn, Stephen


Clarke, Rt Hon Tom (Coatbridge)
Heppell, John


Clarke, Tony (Northampton S)
Hesford, Stephen


Clelland, David
Hill, Keith


Coaker, Vernon
Hinchliffe, David


Coffey, Ms Ann
Hodge, Ms Margaret


Coleman, Iain
Home Robertson, John


Colman, Tony
Hoon, Geoffrey


Connarty, Michael
Hope, Phil


Cook, Frank (Stockton N)
Hopkins, Kelvin


Cooper, Yvette
Howarth, Alan (Newport E)


Corbett, Robin
Howarth, George (Knowsley N)


Corbyn, Jeremy
Howells, Dr Kim


Corston, Ms Jean
Hughes, Ms Beverley (Stretford)


Cousins, Jim
Hughes, Kevin (Doncaster N)


Crausby, David
Humble, Mrs Joan


Cryer, Mrs Ann (Keighley)
Hurst, Alan


Cryer, John (Hornchurch)
Hutton, John


Cummings, John
Iddon, Dr Brian


Cunningham, Rt Hon Dr John (Copeland)
Ingram, Adam



Jackson, Ms Glenda (Hampstead)


Cunningham, Jim (Cov'try S)
Jackson, Helen (Hillsborough)


Dalyell, Tam
Jenkins, Brian


Darling, Rt Hon Alistair
Johnson, Alan (Hull W & Hessle)


Darvill, Keith
Jones, Barry (Alyn & Deeside)


Davey, Valerie (Bristol W)
Jones, Helen (Warrington N)


Davidson, Ian
Jones, Ms Jenny (Wolverh'ton SW)


Davies, Rt Hon Denzil (Llanelli)



Dawson, Hilton
Jones, Jon Owen (Cardiff C)


Dean, Mrs Janet
Jones, Dr Lynne (Selly Oak)


Denham, John
Jones, Martyn (Clwyd S)


Dewar, Rt Hon Donald
Keeble, Ms Sally


Dobbin, Jim
Keen, Alan (Feltham & Heston)


Donohoe, Brian H
Keen, Ann (Brentford & Isleworth)


Doran, Frank
Kelly, Ms Ruth


Dowd, Jim
Kennedy, Jane (Wavertree)


Drew, David
Kidney, David


Drown, Ms Julia
Kilfoyle, Peter


Eagle, Maria (L'pool Garston)
King, Andy (Rugby & Kenilworth)


Edwards, Huw
Kumar, Dr Ashok


Efford, Clive
Laxton, Bob


Ennis, Jeff
Lepper, David


Etherington, Bill
Leslie, Christopher


Fatchett, Derek
Lewis, Ivan (Bury S)


Field, Rt Hon Frank
Lewis, Terry (Worsley)


Fisher, Mark
Liddell, Mrs Helen


Fitzsimons, Loma
Linton, Martin


Flint, Caroline
Livingstone, Ken


Flynn, Paul
Lloyd, Tony (Manchester C)


Follett, Barbara
Lock, David


Foster, Rt Hon Derek
Love, Andrew


Foster, Michael Jabez (Hastings)
McAllion, John


Foster, Michael J (Worcester)
McAvoy, Thomas


Foulkes, George
McCabe, Steve


Fyfe, Maria
McCafferty, Ms Chris






McCartney, Ian (Makerfield)
Russell, Ms Christine (Chester)


McDonnell, John
Ryan, Ms Joan


McFall, John
Salter, Martin


McGuire, Mrs Anne
Sarwar, Mohammad


Mackinlay, Andrew
Savidge, Malcolm


McLeish, Henry
Sawford, Phil


McNamara, Kevin
Sedgemore, Brian


McNulty, Tony
Shaw, Jonathan


McWalter, Tony
Sheerman, Barry


Mahon, Mrs Alice
Sheldon, Rt Hon Robert


Mandelson, Peter
Shipley, Ms Debra


Marsden, Gordon (Blackpool S)
Short, Rt Hon Clare


Marsden, Paul (Shrewsbury)
Simpson, Alan (Nottingham S)


Marshall, David (Shettleston)
Singh, Marsha


Marshall, Jim (Leicester S)
Skinner, Dennis


Marshall—Andrews, Robert
Smith, Rt Hon Andrew (Oxford E)


Martlew, Eric
Smith, Angela (Basildon)


Meacher, Rt Hon Michael
Smith, Rt Hon Chris (Islington S)


Meale, Alan
Smith, Jacqui (Redditch)


Merron, Gillian
Smith, John (Glamorgan)


Michael, Alun
Smith, Llew (Blaenau Gwent)


Michie, Bill (Shef'ld Heeley)
Snape, Peter


Milburn, Alan
Soley, Clive


Miller, Andrew
Southworth, Ms Helen


Mitchell, Austin
Squire, Ms Rachel


Moonie, Dr Lewis
Steinberg, Gerry


Moran, Ms Margaret
Stevenson, George


Morgan, Ms Julie (Cardiff N)
Stewart, David (Inverness E)


Morley, Elliot
Stewart, Ian (Eccles)


Morris, Ms Estelle (B'ham Yardley)
Stinchcombe, Paul


Morris, Rt Hon John (Aberavon)
Stoate, Dr Howard


Mountford, Kali
Stott, Roger


Mudie, George
Stringer, Graham


Mullin, Chris
Stuart, Ms Gisela


Naysmith, Dr Doug
Sutcliffe, Gerry


O'Hara, Eddie
Taylor, Rt Hon Mrs Ann (Dewsbury)


Olner, Bill



O'Neill, Martin
Taylor, David (NW Leics)


Palmer, Dr Nick
Thomas, Gareth R (Harrow W)


Pearson, Ian
Timms, Stephen


Pendry, Tom
Tipping, Paddy


Pike, Peter L
Todd, Mark


Plaskitt, James
Touhig, Don


Pollard, Kerry
Trickett, Jon


Pond, Chris
Turner, Dr Desmond (Kemptown)


Pope, Greg
Turner, Dr George (NW Norfolk)


Pound, Stephen
Twigg, Derek (Halton)


Powell, Sir Raymond
Twigg, Stephen (Enfield)


Prentice, Ms Bridget (Lewisham E)
Vis, Dr Rudi


Prentice, Gordon (Pendle)
Ward, Ms Claire


Primarolo, Dawn
Wareing, Robert N


Prosser, Gwyn
Watts, David


Purchase, Ken
White, Brian


Quin, Ms Joyce
Whitehead, Dr Alan


Quinn, Lawrie
Wicks, Malcolm


Radice, Giles
Williams, Rt Hon Alan (Swansea W)


Rammell, Bill



Raynsford, Nick
Williams, Alan W (E Carmarthen)


Reed, Andrew (Loughborough)
Wills, Michael


Robertson, Rt Hon George (Hamilton S)
Winnick, David



Winterton, Ms Rosie (Doncaster C)


Roche, Mrs Barbara
Wood, Mike


Rogers, Allan
Wray, James


Rooker, Jeff
Wright, Anthony D (Gt Yarmouth)


Rooney, Terry
Wyatt, Derek


Rowlands, Ted



Roy, Frank
Tellers for the Noes:


Ruane, Chris
Mr. David Jamieson and


Ruddock, Ms Joan
Mr. Robert Ainsworth.

Question accordingly negatived.

THE CHAIRMAN then proceeded to put forthwith the Question necessary for the disposal of the business to be concluded at that hour.

Clause 71 ordered to stand part of the Bill.

Clause 72

CHANGES TO INCOME TAX STRUCTURE

Dr. Fox: I beg to move amendment No. 381, in page 31, line 31, leave out from 'Board,' to 'and' in line 33.

The Second Deputy Chairman: With this, it will be convenient to discuss the following amendments: No. 382, in page 31, line 34, leave out
'have a significant effect on the practical extent'
and insert
'increase or decrease the revenue available to the Parliament by more than 5 per cent. of the amount available had the maximum tax power been used in the 1997–98 tax year,'.
No. 384, in page 31, line 37, leave out
'as soon as reasonably practical'
and insert 'within one calendar month'.
No. 409, in page 31, line 38, leave out from 'proposal' to second 'to' in line 40'.
No. 385, in page 31, line 38, leave out
'as soon as reasonably practical'
and insert 'within one calendar month'.
No. 387, in page 32, line 3, after 'to,' insert 'basic rate'.
No. 388, in page 32, line 4, leave out 'conditions' and insert 'condition'.
No. 389, in page 32, line 5, leave out 'subsections (4) and (5)' and insert 'subsection (5)'.
No. 390, in page 32, leave out lines 9 to 17.
No. 392, in page 32, line 14, leave out from 'would' to end of line 17 and insert
'be to raise or forego £450 million in 1997–98 prices, increased in line with the general government implied deflator.'.
No. 393, in page 32, line 15, leave out
'broadly the same from year to year as'
and insert
'within 5 per cent. of the amount'.
No. 396, in page 32, line 21, leave out 'generally'.
No. 397, in page 32, line 21, leave out 'significantly different from' and insert
'within 5 per cent. of.

Dr. Fox: It will take me about as long to deliver this speech as it took you, Mr. Lord, to read out that long list of amendments.
Clause 72 is one of the most important in the Bill and, as anyone who has read the Bill will know, one of the most complex. It was an essential part of the referendum that the Parliament should be able to raise, in the words of the White Paper, £450 million or an index-linked equivalent sum, but that is not in the Bill; it is couched in different terms. Why is there no reference in the Bill to the £450 million? Why was it left out? The clause is more loosely drafted, imprecise and unclear than most in the Bill. Indeed, it is contradictory. We therefore need to ask two questions at the outset: what did the electorate believe they were voting for in the referendum; and what are they getting in the Bill as a result?
I shall begin with the clause's imprecise nature. Subsection (1)(b) is a clear example of the problem. It says:
that proposal is one made and published by the Treasury or the Board, or (without having been so made and publicised) appears to the Treasury to be a proposal to which effect is likely to be given by Act of Parliament.
That would hardly get a plain English award.
More important, we are concerned about some of the terms in the clause. What are we to make of terms such as "significant effect",
as soon as reasonably practicable",
and "likely"? Amendment No. 382 would define "significant effect" as varying revenue by 5 per cent. As the Bill stands, the Treasury alone will decide what is significant. What if the Scottish Parliament decides that changes to income tax Acts are significant? Will that count? Even if there were some sort of arbitration, "significant" is ill defined. It would be far better to stipulate it in the Bill, so that there was no question of friction as a result of imprecision. I readily confess that the figure of 5 per cent. is arbitrary, but I hope that the Minister will think about the matter again and table an amendment at a later stage so that we shall be rid of such extremely unhelpful imprecision.
9 pm
The main issue in clause 72 is whether and how the Scottish Parliament's extra revenue would be maintained in the light of changing economic circumstances. We must consider the clause in conjunction with clause 69, which leads Scottish voters—as did the referendum campaign—to believe that 3p would be the limit of the Scottish Parliament's tax-raising power, but, in two potential situations, major changes may occur. Either a United Kingdom Chancellor of the Exchequer raises thresholds and, as a result, produces a decreased number of basic rate taxpayers, or, as a result of a recession or adverse economic circumstances, the number of taxpayers falls. How, then, would revenue be maintained? It would not, as the hon. Member for North Tayside (Mr. Swinney) said in an earlier debate, just be tough for a Scottish Parliament, because the Bill appears to make provision for just such circumstances.
Under clause 72(2)(a), if
in the Treasury's opinion, an amendment of the Parliament's tax-varying powers is required as a consequence of the proposal",
the Treasury would act to make up the amount of money that might be lost. It must take account of subsection (4)(b), which says:
after making due allowance for annual changes in the retail prices index,
that the practical extent of the Parliament's tax-varying powers would remain broadly the same from year to year as it would be if … the law relating to income tax were the same from year to year as it was in relation to the year 1997–98.
As I understand it, that part of the Bill is to protect the Parliament's revenue-raising powers and ensure that it works with a consistently similar sum of money. I can draw only two conclusions from the two paragraphs when they are taken together. First, the Treasury could produce a situation that might result in the need to raise more

money from fewer income tax payers, as it is committed to making the "practical extent" of tax-raising powers consistent. Secondly, that could require a rise in income tax of more than 3p.
It is only common sense that, if the Parliament has to raise the same amount of money—index-linked—and the number of taxpayers who are paying it shrinks, the amount that has to be raised from each taxpayer must rise. Unless there is something fundamentally amiss with my arithmetic, every hon. Member should accept that. That means that what voters thought they were voting for in the referendum—a 3p ceiling on tax-raising powers—is not in fact a ceiling. Especially as the Minister has consistently said today that the changes must be confined to income tax, I can see no way of maintaining income other than a rise of more than 3p.
The Opposition tabled amendment No. 387 to provide protection for taxpayers and to clarify the Government's intentions. Making the basic rate explicit will stop exactly what the hon. Member for North Tayside seemed to want: to be able look at other areas of income tax, such as raising the top rate, moving other income taxes around or even introducing new income taxes in Scotland. All that would be allowed if the words "basic rate" were not stipulated in clause 72(3)(a).

Mr. Dalyell: Is not that what the hon. Member for North Tayside (Mr. Swinney) and his colleagues are quite legitimately and honourably all about? They do want that.

Dr. Fox: It might be legitimate, but I am not sure whether it is particularly honourable to campaign in favour of one economic change in a referendum but knowingly to want to introduce quite a different one.
As we have said from the outset, we want to minimise potential points of friction. It is far better to include such stipulations in the Bill than to leave it open to vague interpretation. I whole-heartedly entreat the Minister to consider amendment No. 387. If the Government intend any changes to be limited to the basic rate, they must say so. Otherwise, various income taxes may be changed.
If clause 72(4) is to protect against loss of revenue, subsection (5) is clearly designed to reassure taxpayers. It states that
the effect on the levels of the after-tax income of Scottish taxpayers generally
will be much the same as in previous years of assessment. That is quite different from the notes on clauses. The question is how we interpret subsection (5). If basic rate taxpayers are to be protected, how could subsections (2) or (4) be put into effect? They would become contradictory. Do the Government not intend "taxpayers" to mean "basic rate taxpayers"?
The Opposition's suspicion begins to rise given that the notes on clauses say:
the proposed revised powers must, if exercised, have broadly the same impact on the after-tax income levels of individual tax payers as the existing powers".
Which taxpayers are we talking about? Are we talking about all taxpayers, basic rate taxpayers, or could the word "generally" in subsection (5) mean average, across-the-board Scottish taxpayers? Therefore, if some taxpayers are taken out of the tax bands, others' taxes will have to rise to keep the general level of income the same.
That would be open season on basic rate taxpayers. It is what we have warned of all along. We have always said that the danger would be that the Bill was not watertight; that it would be so loosely drafted that it would open the door to those who wanted to set higher basic rates for those in the middle bracket in Scotland than elsewhere in the United Kingdom. That means that if the Chancellor of the Exchequer reduced taxation by raising thresholds, the burden would immediately fall on Scottish basic rate taxpayers, by virtue of this clause.

Mr. Alasdair Morgan: Does the hon. Gentleman agree with my interpretation of the clause, which is that it gives the power to change these arrangements in future to the Westminster Parliament, not the Scottish Parliament? Given his views, the hon. Gentleman should be happy to see the Scottish Parliament's powers of taxation being regulated by this House.

Dr. Fox: A neat try—but we want any changes made explicit in the Bill. The hon. Member for Linlithgow (Mr. Dalyell) rightly pointed out just now that this is exactly the sort of friction that the nationalists want in the Scottish Parliament. They want the Bill left vague, because that maximises the possibilities of future trouble-making. They want nothing fixed in statute. The hon. Member for Galloway and Upper Nithsdale (Mr. Morgan) said during the referendum campaign that he wanted £450 million to be the limit; now, he does not want it to be the limit. He wants the clause to be unamended, because that maximises the chances of making trouble once the Parliament is set up.
We believe that the clause is dangerously drafted, confusing and contradictory. Many of our amendments are designed to probe, but amendment No. 390 is extremely important in its own right. If we get no satisfactory answer on it from the Minister, we shall push it to a Division to show that we understand the dangers that basic rate taxpayers could be up against if these plans come to fruition. We warned about an open season on Scottish taxpayers; unfortunately, that is what the Bill provides for.

Mr. Dalyell: Clause 72 presents real problems. First, I should like to ask a technical question posed by Martin Jones of Maclay, Murray and Spens, Glasgow tax experts. I talked to him at some length this morning about subsection (1)(b). He wants to know about the cumulative effect of modifications as distinct, first, from each modification separately; or secondly, the modifications of each year taken separately. What happens about three years of changes to the lower band, or about capital allowance changes? Serious lawyers would like an answer to that question.
My true concern has to do with the delineation of devolved functions. The delineation of functions is always a challenging task. There are, of course, many existing federations which, by definition, have such delineations in place; but most of them—at least the developed states with a political and public culture broadly comparable with ours—have been federations for a century or more. Their basic delineations were accordingly established at times when governmental functions were usually much less dense, extensive and interactive than they are now.

The dividing lines have, by and large, evolved gradually and pragmatically within cultures familiar with acceptance of the federal concept.
Here, however, we are not talking about a federal concept; we are talking about a unique kind of semi-federal concept. Leading examples of the genre such as Australia, Canada and the United States stretch across large territories, so cheek-by-jowl comparison is less intense. It is without parallel anywhere else in the world to try to draw an entirely new legislative and financial boundary through a complex governmental scene, in a relatively small and densely populated island, with a powerful culture and an unusually strong nationwide media structure, giving rise to expectations of consistent treatment right across the UK.
Two basic questions arise in consideration of the crucial problem of delineation. Should the line be drawn by describing what is devolved and what is not devolved? In 1974–77, the former route was taken. Furthermore, should the line be drawn by broad description of subject or by detailed mapping according to current statutes? In 1974–77, the latter route again was taken. The 1974–77 approach produced long, complex Bills and was accordingly much criticised at the time and afterwards. The White Paper and the Bill indicate the opposite approach, but it should be recognised that there are considerable practical difficulties in regard to both approaches, whichever course is preferred. There is no logical reason why the difficulties would be removed simply by reversing the approach adopted in the 1998 Bill.
The problem is policing the delineation. The choice of approach to delineation on financial and legal matters interacts with the question of how the delineation is to be policed. Who is to decide whether the Scottish Parliament has overstepped its powers? During the 1974–77 saga, that was a matter of considerable argument in the Government, centring on the issue of judicial review.
That bring us to the question of judicial review and who is to decide when the Scottish Parliament asks whether it is to have more taxation. It is absolutely certain that that will come up soon after Holyrood is established. The expectations have been raised out of all recognition. All sorts of problems—lone parents, tuition fees; you name it—will be solved when there is a Scottish Parliament. It is not laws, let alone speeches in that Parliament, that will deal with those matters, but resources. The demand for resources will be huge. That is why delineation is crucial. This is the point in the Bill at which to ask questions about it.
9.15 pm
One argument, advanced virtually as a matter of basic legal and constitutional principle, is that it would be wrong to deny citizens the right to argue in the courts that a Scottish Parliament Act disadvantaging them exceeded the powers granted by Westminster in a devolution statute. The other argument, arising partly from an awareness of the boundary complexity problem, is that it would be unreasonable in practice and politically objectionable in Scotland that primary legislation and financial regulations of the Parliament should be liable at any time, perhaps long after enactment, to be struck down by the courts as ultra vires. The more broadly drawn the delineation, the greater the risks.
If this argument prevails, the question still arises as to who is to police the boundary. At some point, somebody must. If there is no general right of post-enactment judicial review of the vires of primary legislation or financial legislation, there must be some procedure—legal or Westminster parliamentary—for providing a nihil obstat at the time of enactment. We come back to the lawyers. The procedure for considering vires and resolving disputes must be clarified before the Bill passes into law.
No course is free from difficulty. It is fair to acknowledge that in the past 20 years public opinion has become more accustomed—because of the operation of the European Court—to the idea that the legal system might be able to overrule statute passed by a democratically elected body. That does not make the experience politically comfortable. The scale and weight of those incidents might—depending on the quality and style of the devolutionary delineation, the political climate, and how widely any right of challenge to vires extends—be a good deal more onerous than in the European dimension, as it would be additional to that dimension.

Dr. Fox: Does the hon. Gentleman accept that with the spectre of judicial review looming at any time, it would be far better for terms in the clause such as "significant effect", "likely" or "reasonably practicable" to be defined much more closely? Are we not asking for trouble with judicial review later by leaving the Bill so loosely phrased?

Mr. Dalyell: I shall reply to that by asking the Minister a question. What is the legal advice on all this? I agree with the views expressed from the Opposition Front Bench on this matter. The terms are very loose. That is also the view of the Law Society and other lawyers who have studied the Bill. Are the Government saying that, according to their legal advice, the Bill is sufficiently watertight to avoid a challenge in the courts such as Jarndyce v. Jarndyce?
Incidentally, that would lead to tremendous political discontent on the part of all Members of the Holyrood Parliament, including Conservative Members. Let us not assume that the Conservatives would avoid those pressures. They would face the same problems because of the expectations that have been raised in Scotland. The entire Parliament would create those pressures.
I conclude with this question: what legal advice have the Government received about these very delicate and important matters?

Mr. Laurence Robertson: I support what my hon. Friend the Member for Woodspring (Dr. Fox) said about the possibility of the Treasury's changing the rules so that the Scottish Parliament could levy a higher taxation rate than 3p in the pound. My hon. Friend has covered that point, but it is extremely important as regards democracy.

Mr. Alasdair Morgan: The Bill does not give the Treasury the power to change any rule: the Treasury is given the power to suggest changes to the House.

Mr. Robertson: The Scottish people were asked to vote on whether they wanted the Scottish Parliament to have tax-varying powers. They understood that the rate would be no more than 3p in the pound, but it could well be more than that.
I refer to the constraints that might be placed on the Treasury. The Chancellor of the Exchequer has said—I believe very reasonably—that he might want to introduce a taxation rate of 10p in the pound. What effect will that have on the Scottish Parliament's ability to raise £450 million? Will it not place the most enormous constraints on the Treasury's ability to act for the whole United Kingdom? I ask the Minister to reply to those two points.

Mrs. Laing: Once again, I agree with the remarks of the hon. Member for Linlithgow (Mr. Dalyell). He has made some serious points tonight that are often overlooked in the public debate about the Bill. He referred, in particular, to the difficulties of delineation and the problems arising from it. It is an understatement to say that the confusion and conflict that the problems will create are a lawyer's paradise. I know many lawyers, both north and south of the border, who must be rubbing their hands with glee at the thought of the business that will come their way in the next few years.
We begin to suspect that the Government have no wish to clear up the confusion in the Bill. We offer clarity through our amendments. The Bill would become clearer if the Government accepted the amendments. However, they will not, so we must assume that they wish to preserve the conflicts and the uncertainties that we have pointed out time and again.
This warning has been issued many times: if the conflicts that exist on the face of the Bill are not resolved, the Scottish people will not get what they voted for in September. They voted for a limited amount of devolution and a little variance on tax. If the conflicts are not solved now and the Bill is not clarified, devolution will not work. If devolution does not work, the Scottish people will get what Scottish National party Members want them to have: a separate Parliament and a separate Scotland. The Government have been warned about that time and again, but they constantly ignore our warnings.

Mr. Prior: It is likely that, in the not-too-distant future, a Budget will raise thresholds for paying basic rate income tax, so that the tax base in Scotland will fall. If it falls from £450 million to £350 million, for example, the Westminster Parliament will have to decide whether to extend the tax base in Scotland—that will be a clear example of the problem of delineation that the hon. Member for Linlithgow (Mr. Dalyell) mentioned. Until delineation between the two Parliaments is sorted out, problems over taxation will continue each year.

Mr. McLeish: It would be helpful to remind Conservative Members in particular of the intention behind the clause—to provide protection from the erosion of the tax base. Conservative Members have claimed that the clause is imprecise, but it is important to be flexible in these


matters. We cannot be precise, as the future shape of the United Kingdom tax structure, in the context of which any change to present arrangements would be made, is not known. Any changes would be to the income tax system, not to any other form of taxation; they would maintain, as far as possible, the tax's current distributional effects—the same people will pay roughly the same amount of tax as they will under the proposals in clause 72.
It may also help if I briefly outline how what I regard as the fall-back power in clause 72 will work. The clause falls into two parts. Subsections (1) and (2) set out the process whereby any fall-back power would be introduced. In effect, what will happen in most foreseeable circumstances is that, first, the Treasury would internally develop a proposal to change UK tax arrangements. Secondly, if the Treasury assessed that that would significantly reduce or increase the Scottish tax take, it would, if it thought it necessary, again draw up internally proposals for changing the Bill's powers.
Thirdly, when the UK tax changes became public on Budget day or possibly in a Green Budget, the Treasury would be obliged, as soon as reasonably practicable, to lay before the House in a statement whether it believed that the Scottish power needed to be changed and what the changes, if any, should be.
In practice, the Treasury would be expected to consult the Scottish Executive before laying revised proposals before the House as soon as was reasonably practicable. Once a proposal had been laid before the House, it would be incorporated into the Finance Bill as an amendment to the Scotland Bill's powers.
Subsections (3) to (7) set parameters to any revised power—in effect, that roughly the same people should pay roughly the same amount of income tax as they would under the power that is currently proposed. Once any new power had been implemented, the Scottish Parliament would either stick with any tax resolution that it had already made under its formal powers or make a new in-year resolution under the new power.
Of course, we should note that the new power would need to include provision allowing an in-year resolution to be made in these circumstances. Under clause 70, such an in-year resolution would be considered.
I understand from the Conservative party's hostility to the referendum result in favour of a Scottish Parliament that it will exaggerate and distort; it can never regard an issue such as the one covered by the clause as simple and straightforward.

Mr. John Hayes: Will the Minister give way?

Mr. McLeish: I shall not give way just now.
I respect what my hon. Friend the Member for Linlithgow (Mr. Dalyell) said; it was principled, and he, at least, has been consistent in his opposition over many years. However, on this and other clauses, the Opposition have tried to hide behind a smokescreen of distortions and exaggerated claims about a lawyer's paradise; in fact, their basic hostility creeps through on every possible occasion.
The Committee's objective is to scrutinise the Bill and it is, of course, acceptable for hon. Members to make political points. However, let us not pretend that those are the same things.

Dr. Fox: Under the Bill, as drafted, would it be possible for the Treasury to increase Scottish tax-raising powers by more than 3p in the pound?

Mr. McLeish: I repeat that the key purpose of the provision is to protect the tax take. It does not need a great deal of imagination or intellect to appreciate what that is. The Bill, which will become an Act, will have the ability to raise or lower the basic rate of income tax by 3p. In future, however, changes made by any Government or any Treasury could have an impact on the tax take. The clause provides an important fall-back mechanism for the Westminster-based Parliament and the Treasury to ensure that the level of tax take that we try to build into the Bill is taken forward in subsequent years. That is straightforward and common sense.
There must be flexibility, and that is provided by a fall-back power. Where would flexibility lie if the Chancellor of the Exchequer, in this place, changed the basic tax system? A fall-back power is essential because it will protect the Parliament, the tax take and the integrity of the tax-varying power. In addition, it will protect the taxpayer.

Mr. Gerald Howarth: Does not the clause and everything that the Minister has said confirm that we are talking about tax-raising powers? We are not talking about tax-varying powers. The clause, and the Bill in general, is geared towards increasing the tax burden on the Scottish people. Will the Minister not come clean about that?
It is not only the hon. Member for Linlithgow (Mr. Dalyell) who has principles about these issues. It is the duty of the Committee to point out to the Minister the practical consequences of what could arise for the Scottish people, as drawn from a detailed study of the Bill.

Mr. McLeish: With great respect, that is complete and utter nonsense. The situation has been well discussed in Scotland, in the publication of the White Paper, in the referendum and in the publication of the Bill. It is interesting that the Conservative party used to help the business community through some of its difficulties. Nowadays, however, only the Conservative Opposition see the perceived dangers—they make them up as they go along—as we consider the Bill in Committee.

Mr. Hayes: Will the Minister give way?

Mr. McLeish: No. I am not giving way at this stage.
No self-respecting Parliament with a working tax-varying power could avoid a fall-back position. That having been said, I shall deal with the specific amendments.

Mr. Dalyell: Neither my hon. Friend the Minister nor I is a tax lawyer. Rather than asking my hon. Friend to answer the question that I posed on cumulative accumulation of tax, may I suggest that a tax expert from


the Scottish Office gets together with Martin Jones of Maclay Murray and Spens and the Law Society's tax committee to sort out this issue? I suggest that my hon. Friend writes to us or returns to the House with a closer definition on Report.

Mr. McLeish: Inland Revenue and Scottish Office officials are in consultation with many groups about the rules and duties that will be taken on board through the tax-varying power. I take my hon. Friend's suggestion on board, but consultation is taking place.
The group of amendments is concerned with what, for convenience, I shall term the fall-back power. Amendments Nos. 381 and 409 would remove from the Treasury the duty to start taking steps to consider a replacement tax-varying power in circumstances where it was obvious that it should be doing so. The circumstances in question would be where it looked likely that a major change to the UK tax structure was likely to be enacted, but, for some reason, that had not been formally proposed or published by the Treasury or Inland Revenue. Thus, for example, the Treasury would not be under an obligation to act when, as has happened, the Government accepted an amendment to income tax provisions during the passage of a Finance Bill, but had not formally proposed or published the policy enshrined in that amendment. That would plainly be absurd, and I hope that the amendments will be withdrawn.
The purpose behind amendment No. 382 is to put a figure on the trigger for clause 72 coming into play. The Bill as drafted leaves that undefined; this is deliberate. If we were to determine a particular figure, whether a 5 per cent. increase or decrease in potential tax take, or some other figure, that could easily trigger the clause when it was in the interests of nobody to trigger it. Alternatively, it could deprive the Scottish Parliament of an important opportunity to enter negotiations with the UK Government.
I simply do not accept arguments that a lack of definition will lead to conflict. Of course, there may have to be negotiation in particular circumstances, and I have no doubt that those negotiations may sometimes be tough, but I would argue that is a much more stable and mature arrangement than sticking an arbitrary, non-negotiable statutory marker in the ground. Therefore, I do not accept the need for the amendment.
Amendments Nos. 384 and 385 bring those of us who are accustomed to the work of Standing Committees on to familiar territory—the respective merits of a requirement to do something as soon as "reasonably practicable" or within a particular, specified time frame. Amendment No. 384 at least has the merit of making sense, although I do not accept that, in all circumstances, it would be desirable to require the Treasury to lay material before the House within a month of publishing or proposing a tax change. Amendment No. 385 should be rejected.
Amendments Nos. 387 and 390 are an attempt to provide that any replacement power should apply only to the basic rate of income tax. The deletion by amendment No. 390 of one of the particular conditions that any replacement tax would have to meet is, I assume, intended as being consequential, but that requirement is itself

potentially completely unworkable. It is precisely for that reason that we have not limited the replacement power, but nevertheless have included the detailed provisions at clause 72(4) and (5) to ensure that, under any future power, broadly the same people would end up having broadly the same liability for the Scottish variable tax.
Amendments Nos. 392 and 393 are not acceptable. Amendment No. 392 seeks to put a precise figure on the tax that any replacement tax power should be capable of raising.
Amendment No. 393 attempts to provide relative precision in an area where a more broad-brush approach is the only practical way forward. The design of any replacement tax system will inevitably have to take into account a whole range of factors.
Amendment No. 396 strives for too great a degree of precision. The clause makes it quite clear that Parliament expects the effect of any new tax power generally to be broadly similar, as it affects individuals, to the power currently in the Bill. Again, precision is the enemy of the setting of sensible, workable parameters. The amendment should not be accepted.
Amendment No. 397 attempts to establish 5 per cent. parameters—this time on the effect of any replacement tax power on individuals' income after tax. Because of the way in which it has been drafted, it would prevent any new after-tax income level coming within 5 per cent. of previous levels. I suspect that that is not something any of us want.
This has proved to be a wide-ranging group of amendments, testing the fall-back power provisions. The Government's approach in relation to that power has been to put into statute the general framework of how any replacement power would be designed, in accordance with the undertakings that we gave in the White Paper. I am convinced that that is the right approach, given that we cannot begin to predict the specific circumstances in which the power will operate. Therefore, I ask the Committee not to accept the amendments.

Dr. Fox: Anyone who has read the clause or heard the Minister's response to the debate will realise why we had a pre-legislative and not a post-legislative referendum: people might have recognised what recipe the Government had for them. The Minister's inability to accept any amendment, or even the arguments made in good faith by Opposition Members, is sad. The Government's ability to speak with a forked tongue on these matters is extraordinary, and their condescension staggering. The Bill is loosely drafted.
The Minister paid tribute to the integrity of the hon. Member for Linlithgow (Mr. Dalyell) and then proceeded to disregard all his arguments about the potential for judicial review, and the terms in which the Bill is drafted. The Secretary of State urged us on Second Reading to look at everything on a worst case scenario. Now the Government ask us to welcome a situation in which Westminster will decide any changes to Scotland's taxes, which will be different from the position in England. That is what they used to complain about when the poll tax came into operation. They now suggest that it will be all right; that it will not be exploited by the nationalists; that we have nothing to fear from this process, and that we are scaremongering by bringing up these subjects.
This is a recipe for friction. That is one of the many reasons why we cannot accept the Minister's arguments, which are contradictory. Clause 72(4) seeks to protect the Parliament's income. Clause 72(5) seeks to protect the taxpayer's income. In the Minister's words, roughly the same people should pay roughly the same tax-how precise for a financial measure. We simply cannot accept that, but I guess that we should not be upset about contradictions from a Government who are introducing a tax-raising power, with a Prime Minister who says when he goes overseas that raising tax is a threat to jobs but thinks that it is all right to introduce it in Scotland, where, apparently, the laws of economics will be suspended. I shall seek to withdraw amendment No. 381, but press amendment No. 390 to the vote.
I beg to ask leave to withdraw the amendment.
Amendment, by leave, withdrawn.
Amendment proposed: No. 390, in page 32, leave out lines 9 to 17.—[Dr. Fox.]

Question put, That the amendment be made:—

The Committee divided: Ayes 126, Noes 328.

Division No. 177]
[9.39 pm


AYES


Ainsworth, Peter (E Surrey)
Gorman, Mrs Teresa


Amess, David
Gray, James


Ancram, Rt Hon Michael
Grieve, Dominic


Arbuthnot, James
Hamilton, Rt Hon Sir Archie


Atkinson, Peter (Hexham)
Hawkins, Nick


Baldry, Tony
Hayes, John


Bercow, John
Heald, Oliver


Beresford, Sir Paul
Heathcoat-Amory, Rt Hon David


Body, Sir Richard
Hogg, Rt Hon Douglas


Boswell, Tim
Horam, John


Bottomley, Peter (Worthing W)
Howarth, Gerald (Aldershot)


Bottomley, Rt Hon Mrs Virginia
Hunter, Andrew


Brooke, Rt Hon Peter
Jack, Rt Hon Michael


Browning, Mrs Angela
Jenkin, Bernard


Bruce, Ian (S Dorset)
Johnson Smith, Rt Hon Sir Geoffrey


Butterfill, John



Cash, William
Key, Robert


Chapman, Sir Sydney (Chipping Barnet)
Kirkbride, Miss Julie



Laing, Mrs Eleanor


Chope, Christopher
Lait, Mrs Jacqui


Clappison, James
Lansley, Andrew


Clark, Rt Hon Alan (Kensington)
Leigh, Edward


Clark, Dr Michael (Rayleigh)
Letwin, Oliver


Clarke, Rt Hon Kenneth (Rushcliffe)
Lidington, David



Lilley, Rt Hon Peter


Clifton—Brown, Geoffrey
Lloyd, Rt Hon Sir Peter (Fareham)


Collins, Tim
Loughton, Tim


Cormack, Sir Patrick
Luff, Peter


Curry, Rt Hon David
Lyell, Rt Hon Sir Nicholas


Davis, Rt Hon David (Haltemprice)
McIntosh, Miss Anne


Duncan, Alan
Maclean, Rt Hon David


Duncan Smith, Iain
McLoughlin, Patrick


Emery, Rt Hon Sir Peter
Madel, Sir David


Evans, Nigel
Malins, Humfrey


Faber, David
Maples, John


Fabricant, Michael
Mates, Michael


Fallon, Michael
Maude, Rt Hon Francis


Flight, Howard
Mawhinney, Rt Hon Sir Brian


Forth, Rt Hon Eric
May, Mrs Theresa


Fowler, Rt Hon Sir Norman
Moss, Malcolm


Fox, Dr Liam
Nicholls, Patrick


Fraser, Christopher
Ottaway, Richard


Garnier, Edward
Page, Richard


Gibb, Nick
Paice, James


Gill, Christopher
Paterson, Owen


Gillan, Mrs Cheryl
Pickles, Eric





Prior, David
Taylor, John M (Solihull)


Randall, John
Taylor, Sir Teddy


Redwood, Rt Hon John
Tredinnick, David


Robertson, Laurence (Tewk'b'ry)
Trend, Michael


Roe, Mrs Marion (Broxbourne)
Tyrie, Andrew


St Aubyn, Nick
Viggers, Peter


Sayeed, Jonathan
Wardle, Charles


Shephard, Rt Hon Mrs Gillian
Waterson, Nigel


Shepherd, Richard
Whittingdale, John


Simpson, Keith (Mid—Norfolk)
Widdecombe, Rt Hon Miss Ann


Soames, Nicholas
Wilkinson, John


Spelman, Mrs Caroline
Willetts, David



Winterton, Mrs Ann (Congleton)


Spicer, Sir Michael
Winterton, Nicholas (Macclesfield)


Spring, Richard
Woodward, Shaun


Stanley, Rt Hon Sir John
Yeo, Tim


Steen, Anthony
Young, Rt Hon Sir George


Streeter, Gary



Swayne, Desmond
Tellers for the Ayes:


Syms, Robert
Mr. James Cran and


Taylor, Ian (Esher & Walton)
Mr. Stephen Day.




NOES


Adams, Mrs Irene (Paisley N)
Coaker, Vernon


Ainger, Nick
Coffey, Ms Ann


Alexander, Douglas
Coleman, Iain


Allan, Richard
Colman, Tony


Anderson, Donald (Swansea E)
Connarty, Michael


Anderson, Janet (Rossendale)
Cook, Frank (Stockton N)


Armstrong, Ms Hilary
Cooper, Yvette


Ashton, Joe
Corbett, Robin


Atkins, Charlotte
Corbyn, Jeremy


Barnes, Harry
Corston, Ms Jean


Barron, Kevin
Cousins, Jim


Bayley, Hugh
Crausby, David


Beard, Nigel
Cryer, Mrs Ann (Keighley)


Beckett, Rt Hon Mrs Margaret
Cryer, John (Hornchurch)


Bell, Stuart (Middlesbrough)
Cummings, John


Benn, Rt Hon Tony
Cunningham, Rt Hon Dr John (Copeland)


Bennett, Andrew F



Benton, Joe
Cunningham, Jim (Cov'try S)


Bermingham, Gerald
Cunningham, Ms Roseanna (Perth)


Berry, Roger



Betts, Clive
Dafis, Cynog


Blizzard, Bob
Dalyell, Tam


Blunkett, Rt Hon David
Darling, Rt Hon Alistair


Boateng, Paul
Darvill, Keith


Borrow, David
Davey, Valerie (Bristol W)


Bradshaw, Ben
Davidson, Ian


Brown, Rt Hon Nick (Newcastle E)
Davies, Rt Hon Denzil (Llanelli)


Brown, Russell (Dumfries)
Dawson, Hilton


Browne, Desmond
Dean, Mrs Janet


Buck, Ms Karen
Denham, John


Burden, Richard
Dewar, Rt Hon Donald


Burgon, Colin
Dobbin, Jim


Burnett, John
Donohoe, Brian H


Butler, Mrs Christine
Doran, Frank


Byers, Stephen
Dowd, Jim


Campbell, Alan (Tynemouth)
Drew, David


Campbell, Mrs Anne (C'bridge)
Drown, Ms Julia


Campbell, Menzies (NE Fife)
Eagle, Maria (L'pool Garston)


Campbell—Savours, Dale
Edwards, Huw


Caplin, Ivor
Efford, Clive


Caton, Martin
Ennis, Jeff


Cawsey, Ian
Etherington, Bill


Chapman, Ben (Wirral S)
Ewing, Mrs Margaret


Chaytor, David
Fatchett, Derek


Chidgey, David
Feam, Ronnie


Chisholm, Malcolm
Field, Rt Hon Frank


Clapham, Michael
Fisher, Mark


Clark, Rt Hon Dr David (S Shields)
Fitzsimons, Lorna


Clark, Paul (Gillingham)
Flint, Caroline


Clarke, Eric (Midlothian)
Flynn, Paul


Clarke, Rt Hon Tom (Coatbridge)
Follett, Barbara


Clarke, Tony (Northampton S)
Foster, Rt Hon Derek


Clelland, David
Foster, Michael Jabez (Hastings)






Foster, Michael J (Worcester)
Lewis, Terry (Worsley)


Foulkes, George
Liddell, Mrs Helen


Fyfe, Maria
Linton, Martin


Galbraith, Sam
Livingstone, Ken


Galloway, George
Lloyd, Tony (Manchester C)


Gapes, Mike
Lock, David


Gardiner, Barry
Love, Andrew


Gerrard, Neil
McAllion, John


Gibson, Dr Ian
McAvoy, Thomas


Gilroy, Mrs Linda
McCabe, Steve


Godsiff, Roger
McCafferty, Ms Chris


Goggins, Paul
McCartney, Ian (Makerfield)


Gordon, Mrs Eileen
McDonnell, John


Gorrie, Donald
McFall, John


Griffiths, Nigel (Edinburgh S)
McGuire, Mrs Anne


Griffiths, Win (Bridgend)
Mackinlay, Andrew


Grocott, Bruce
McLeish, Henry


Grogan, John
McNamara, Kevin


Hall, Mike (Weaver Vale)
McNulty, Tony


Hall, Patrick (Bedford)
McWalter, Tony


Hamilton, Fabian (Leeds NE)
Mahon, Mrs Alice


Hancock, Mike
Mandelson, Peter


Hanson, David
Marsden, Gordon (Blackpool S)


Harris, Dr Evan
Marsden, Paul (Shrewsbury)


Harvey, Nick
Marshall, Jim (Leicester S)


Heal, Mrs Sylvia
Martlew, Eric


Healey, John
Meacher, Rt Hon Michael


Heath, David (Somerton & Frome)
Meale, Alan


Henderson, Ivan (Harwich)
Merron, Gillian


Hepburn, Stephen
Michael, Alun


Heppell, John
Michie, Bill (Shef'ld Heeley)


Hesford, Stephen
Michie, Mrs Ray (Argyll & Bute)


Hill, Keith
Milburn, Alan


Hinchliffe, David
Miller, Andrew


Hodge, Ms Margaret
Mitchell, Austin


Home Robertson, John
Moonie, Dr Lewis


Hoon, Geoffrey
Moran, Ms Margaret


Hope, Phil
Morgan, Alasdair (Galloway)


Hopkins, Kelvin
Morgan, Ms Julie (Cardiff N)


Howarth, Alan (Newport E)
Morris, Ms Estelle (B'ham Yardley)


Howarth, George (Knowsley N)
Morris, Rt Hon John (Aberavon)


Howells, Dr Kim
Mountford, Kali


Hughes, Ms Beverley (Stretford)
Mudie, George


Hughes, Kevin (Doncaster N)
Mullin, Chris


Hughes, Simon (Southwark N)
Naysmith, Dr Doug


Humble, Mrs Joan
O'Hara, Eddie


Hurst, Alan
Olner, Bill


Hutton, John
O'Neill, Martin


Iddon, Dr Brian
Öpik; Lembit


Ingram, Adam
Palmer, Dr Nick


Jackson, Ms Glenda (Hampstead)
Pearson, Ian


Jackson, Helen (Hillsborough)
Pendry, Tom


Jenkins, Brian
Pike, Peter L


Johnson, Alan (Hull W & Hessle)
Plaskitt, James


Jones, Barry (Alyn & Deeside)
Pollard, Kerry


Jones, Helen (Warrington N)
Pond, Chris


Jones, Ms Jenny (Wolverh'ton SW)
Pope, Greg



Pound, Stephen


Jones, Jon Owen (Cardiff C)
Powell, Sir Raymond


Jones, Dr Lynne (Selly Oak)
Prentice, Ms Bridget (Lewisham E)


Jones, Martyn (Clwyd S)
Prentice, Gordon (Pendle)


Keeble, Ms Sally
Primarolo, Dawn


Keen, Alan (Feltham & Heston)
Prosser, Gwyn


Keen, Ann (Brentford & Isleworth)
Purchase, Ken


Keetch, Paul
Quin, Ms Joyce


Kelly, Ms Ruth
Quinn, Lawrie


Kennedy, Jane (Wavertree)
Radice, Giles


Kidney, David
Rammell, Bill


Kilfoyle, Peter
Raynsford, Nick


King, Andy (Rugby & Kenilworth)
Reed, Andrew (Loughborough)


Kirkwood, Archy
Rendel, David


Kumar, Dr Ashok
Robertson, Rt Hon George (Hamilton S)


Laxton, Bob



Lepper, David
Roche, Mrs Barbara


Leslie, Christopher
Rogers, Allan


Lewis, Ivan (Bury S)
Rooker, Jeff





Rooney, Terry
Stringer, Graham


Rowlands, Ted
Stuart, Ms Gisela


Roy, Frank
Stunell, Andrew


Ruane, Chris
Sutcliffe, Gerry


Ruddock, Ms Joan
Swinney, John


Russell, Ms Christine (Chester)
Taylor, Rt Hon Mrs Ann (Dewsbury)


Ryan, Ms Joan



Salmond, Alex
Taylor, David (NW Leics)


Salter, Martin
Thomas, Gareth R (Harrow W)


Sanders, Adrian
Timms, Stephen


Sarwar, Mohammad
Tipping, Paddy


Savidge, Malcolm
Todd, Mark


Sawford, Phil
Touhig, Don


Sedgemore, Brian
Trickett, Jon


Shaw, Jonathan
Turner, Dr Desmond (Kemptown)


Sheerman, Barry
Turner, Dr George (NW Norfolk)


Sheldon, Rt Hon Robert
Twigg, Derek (Halton)


Shipley, Ms Debra
Twigg, Stephen (Enfield)


Simpson, Alan (Nottingham S)
Vis, Dr Rudi


Singh, Marsha
Wallace, James


Skinner, Dennis
Ward, Ms Claire


Smith, Rt Hon Andrew (Oxford E)
Wareing, Robert N



Watts, David


Smith, Angela (Basildon)
Welsh, Andrew


Smith, Rt Hon Chris (Islington S)
White, Brian


Smith, Miss Geraldine (Morecambe & Lunesdale)




Whitehead, Dr Alan



Williams, Rt Hon Alan (Swansea W)


Smith, Jacqui (Redditch)



Smith, John (Glamorgan)
Williams, Alan W (E Carmarthen)


Smith, Llew (Blaenau Gwent)
Willis, Phil


Smith, Sir Robert (W Ab'd'ns)
Wills, Michael


Snape, Peter
Winnick, David


Soley, Clive
Winterton, Ms Rosie (Doncaster C)


Southworth, Ms Helen
Wood, Mike


Squire, Ms Rachel
Wray, James


Steinberg, Gerry
Wright, Anthony D (Gt Yarmouth)


Stewart, David (Inverness E)
Wyatt, Derek


Stewart, Ian (Eccles)



Stinchcombe, Paul
Tellers for the Noes:


Stoate, Dr Howard
Mr. David Jamieson and


Stott, Roger
Mr. Robert Ainsworth.

Question accordingly negatived.

Clause 72 ordered to stand part of the Bill.

Clause 73

ACCOUNTING FOR ADDITIONAL SCOTTISH TAX

Mr. Bernard Jenkin: I beg to move amendment No. 399, in page 32, line 35, at end insert
'provided that all costs incurred by the Board and the Inland Revenue in collecting such amounts shall be defrayed from the Scottish Consolidated Fund.'.

The Chairman of Ways and Means (Sir Alan Haselhurst): With this, it will be convenient to discuss the following amendments: No. 400, in page 33, line 13, leave out 'may' and insert 'shall'.
No. 401, in page 33, line 17, at end insert—
'(5A) Arrangements under subsection (4) shall not include provision for the adjustment of the amounts paid into the Scottish Consolidated Fund under this section on the basis of changes in the taxable income of the generality of Scottish income tax payers deriving from economic fluctuations in the United Kingdom as a whole.
(5B) Arrangements under subsection (4) shall include provision for the adjustment of the amounts paid into the Scottish Consolidated Fund under this section on the basis of changes in the taxable income of the generality of Scottish income tax-payers deriving from economic fluctuations attributable to previous resolutions of the Parliament.'.


No. 402, clause 74, page 33, line 37, at end insert,
'together with all costs incurred by the Board and the Inland Revenue in receiving such payments.'.
No. 403, in page 34, line 13, leave out 'may' and insert 'shall'.
No. 404, in page 34, line 17, at end insert—
'(5A) Arrangements under subsection (4) shall not include provision for the adjustment of the amounts paid from the Scottish Consolidated Fund under this section on the basis of changes in the taxable income of the generality of Scottish income tax—payers deriving from economic fluctuations in the United Kingdom as a whole.
(5B) Arrangements under subsection (4) shall include provision for the adjustment of the amounts paid from the Scottish Consolidated Fund under this section on the basis of changes in the taxable income of the generality of Scottish income tax—payers deriving from economic fluctuations attributable to previous resolutions of the Parliament.'.

Mr. Jenkin: Clause 73 concerns the treatment of the revenue raised from the SVR—or Scottish variable rate, as we must now learn to call it. Amendment No. 399 merely clarifies the fact that the costs of collecting the tax should fall not on the United Kingdom taxpayer but on the Scottish consolidated fund, in line with paragraph 7.18 of the White Paper. The substance of the amendment may lie elsewhere in the Bill; we merely ask for clarification.
The other amendments, including Nos. 400 and 401, are much more substantive. They are probing, but they are for serious consideration. Clause 73(3) specifies that the Inland Revenue should pay into the Scottish consolidated fund an amount equal to the estimated yield from the additional tax to be paid by Scottish taxpayers. I am bound to say that that cannot have been the expectation of people reading the White Paper, which clearly guaranteed £450 million. The main burden of the clause, however, is to ensure that the yield from the tax is paid into the consolidated fund.
Clause 73 leads to the need for the legislative gyrations in clause 72. Clause 73 on its own would not guarantee the £450 million promised from the full yield of the tax referred to in paragraph 7.13 of the White Paper. Should the £450 million guarantee apply in all cases? Clause 73(5) says that the Treasury may make adjustments to estimates of the tax yield in the light of the initial estimate being wide of the mark. The operative word is "may". Our amendment No. 400 suggests that the word should be "shall".
The Bill establishes the principle that the extra revenue that is gained or forgone by the Scottish Parliament should reflect the tax yield. If it emerges that the Treasury or the Board has made a mistake, whichever is responsible should put it right. It would not be right for the Scottish consolidated fund to collect money that has not been raised for it, just as it would be wrong for the Parliament to forgo funding that has been raised on its behalf. That is the principle that the amendments seek to establish.
Amendment No. 401 proposes an exception. The White Paper was clear about the effects of changes in the tax system, but not clear about the effects of changes in economic circumstances. The amendment proposes two new subsections. Where possible, the Scottish Parliament deserves stability in its funding because it is not to be given the kind of borrowing powers that will enable it to deal with cyclical fluctuations in economic activity.

Our proposed subsection (5A) is intended to protect the Scottish variable rate tax yield from the effects of economic fluctuations in the UK economy.
We do not think that the Scottish Parliament should be immune from the effects of its own decisions. Our proposed subsection (5B) would mean that any increase or decrease in the yield from the Scottish variable rate as a result of the Parliament's decisions would be reflected in payments to the Scottish consolidated fund. For example, if there were a big increase in the business rate poundage in Scotland or if the tartan tax drove people away from Scotland or was levied at the higher marginal rate, as suggested in clause 72, it could have a detrimental effect on Scotland's economic activity. It would reduce the tax yield in line with what is called the Laffer curve and that loss of revenue should be borne by the Scottish Parliament.
There is an alternative scenario. If the policies of the Scottish Parliament took Scotland well ahead of the rest of the UK so that employment rates were higher there, the yield from tax increases would be greater and the Scottish Parliament would be able to collect the dividend of its policies or perhaps levy for the same yield with a lower SVR rate. I commend the amendments to the Committee.

Mr. Dalyell: I have a short question. What happens if there is a shortfall in relation to the yield and the estimates of the Scottish Treasury or the Treasury in London are not achieved? It is a question of contingency planning for a shortfall and for what happens thereafter.

Mr. McLeish: Amendments Nos. 399 and 402 seek to ensure that the costs that are incurred by the Board and the Inland Revenue of running the tax-varying power are met by payments from the Scottish consolidated fund. I give the Committee the absolute assurance that the Inland Revenue's costs will be met by the Scottish Executive. However, it is a matter for administrative arrangement rather than for statutory provision.
Amendments Nos. 400 and 403 seek to strengthen the provision to review the arrangements for estimating what income tax receipts should be paid by or to the Board if the tax-varying power is applied. No such strengthening is needed, as the current wording permits the Board to take into account any adjustments to those arrangements that may be necessary.
Amendments Nos. 401 and 404 seek to ensure that the estimate of income tax receipts paid into the Scottish consolidated fund is not affected by changing economic conditions unless those changed conditions are the result of previous applications of the tax power. The amendments are at odds with all the principles of the overall income tax system of which the Scottish Parliament's tax-varying powers are an integral part. There is no convincing argument for making the proposed adjustments. Even if there were, it would be impossible to disentangle economic effects from other effects on tax take or, more particularly, from the effects on the economy of past Scottish tax changes or from a welter of other influences. The amendments are unhelpful and unworkable. I hope that they will not be pressed.

Mr. Jenkin: The Minister's reply leaves the question of the £450 million guarantee more confused than ever, but, in view of the pressure of time, I beg to ask leave to withdraw the amendment.

Amendment, by leave, withdrawn.

Clause 73 ordered to stand part of the Bill.

Clauses 74 and 75 ordered to stand part of the Bill.

Clause 76

REMUNERATION OF MEMBERS OF THE PARLIAMENT AND EXECUTIVE

Mr. Jenkin: I beg to move amendment No. 415, in page 35, line 13, at end insert—
'(1A) Salaries paid to a member of the Parliament under subsection (1) shall not exceed those for the time being paid to members of the House of Commons.
(1B) The salary paid to the First Minister shall not exceed the average salary for the time being paid to a Secretary of State in the United Kingdom Cabinet.
(1C) The salary paid to a member of the Scottish Executive other than the First Minister shall not exceed the salary for the time being paid to a Minister of State in the United Kingdom Government.'.

The Chairman: With this, it will be convenient to discuss the following amendments: No. 416, in page 35, line 14, after `allowances', insert `and expenses'.
No. 417, in page 35, line 15, at end insert—
'(2A) Allowances paid to members of the Parliament or members of the Scottish Executive under subsection 2 shall not exceed the allowances for the time being paid to members of the House of Commons.'.
No. 418, in clause 77, clause 77, page 35, line 35, after 'salary', insert 'or allowance'.
No. 419, in page 35, line 37, after 'salary', insert 'or allowance'.
No. 420, in page 36, line 1, leave out 'salary' and insert 'allowance'.
No. 421, in page 36, line 4, after 'salary', insert `or allowance'.
No. 422, in page 36, line 6, at end add—
'(3) The Parliament shall ensure that the amount of salary is reduced by the amount of salary payable to the member as mentioned in subsection (1) (a) or (b).'.

Mr. Jenkin: The purpose of the amendments is to establish reasonable limits to the salaries of Scottish Ministers and Scottish Members of Parliament, and to their allowances, and to provide—

It being Ten o'clock, THE CHAIRMAN, pursuant to the Order [13 January] and the Resolution [this day], put forthwith the Questions necessary for the disposal of the business to be concluded at that hour.

Clause 76 ordered to stand part of the Bill.

Clauses 77 to 80 ordered to stand part of the Bill.

Mr. Dalyell: On a point of order, Sir Alan. As I have spoken at some length on important matters in previous debates, it is as much my fault as anyone's, but it is unfortunate that the Government have not had the opportunity to make a statement on the salaries, remunerations and conditions of Members of the Holyrood

Parliament because it is a matter of considerable interest. [Interruption.] Not personal interest—I chose the word delicately. I do not think that anyone would select me.

The Chairman: I think that the hon. Gentleman has made his point. He knows that, as a result of the motion that has been agreed by the House, that is not something over which the occupant of the Chair has any control.

Clause 81

SCOTTISH REPRESENTATION AT WESTMINSTER

Dr. Fox: I beg to move amendment No. 258, in page 37, line 32, leave out from 'is' to end of line 33 and insert
'120 per cent. of the electoral quota for England.'.

The Chairman: With this, it will be convenient to discuss clause 81 stand part and the following: amendment No. 259, in clause 114, page 52, line 13, at beginning insert—
'Subject to subsection (3) below,'.
No. 260, in page 52, line 17, at end add—
'(3) With the exception of an order relating to section 81, no order may be made under subsection (1) until each House of Parliament has approved any draft Order in Council which may be required to give effect to the first report of the Boundary Commission for Scotland to be submitted after 31st December 1997 under section 3(2) of the Parliamentary Constituencies Act 1986.'.
New clause 6—Restrictions on voting rights of Scottish members of House of Commons—
'As from the day on which the Parliament first meets, no member of the House of Commons representing a constituency in Scotland shall be entitled to vote in that House on any matter certified by the Speaker as relating solely to another part, or other parts, of the United Kingdom.'.
New clause 16—Restrictions on voting rights of Scottish members of House of Commons (No. 2)—
'Members of the House of Commons representing constituencies in Scotland may continue to participate in any vote in that House unless the Speaker deems the vote to relate to matters exclusive to England, or to England and Wales.'.
New clause 19—Restriction on voting rights of Scottish Members (Committees on English Affairs)—
'.—No member of the House of Commons representing a constituency in Scotland shall be entitled to vote in, or participate in any other proceedings of, any committee of that House established under any enactment or by the Standing Orders of that House, the functions of which are to consider matters exclusively in relation to England which are not reserved matters within the terms of Schedule 5 to this Act.'.

Dr. Fox: In this, the off-peak part of the debate, some of us will have a chance to delineate arguments that will, no doubt, be taken further by hon. Members who wish to star in the peak viewing time part of the debate on the next day that we consider the Bill, but a few points need to be made at the outset.
We shall debate what has come to be known as the West Lothian question. It is worth pointing out at the outset that we have to get one thing into perspective. Despite what I think is often a distortion in the Scottish media, when we discuss constitutional relationships between Scotland and the rest of the UK, we in this House have to remember that Scotland constitutes 10 per cent. of the UK population and it is unacceptable to force a


constitutional change on the rest of the UK because of what 10 per cent. of the population may want, however much it is their right to have that. We have to keep that in mind when we consider the possible alternatives and answers to that question.
There are two reasons for tabling this group of amendments. The first is to deal, or at least to address, the West Lothian question. It is not possible to deal with, or to answer, that question within the constitutional relationships that we are being asked to discuss. The second reason is to ensure that the Scottish Parliament is set up in the most practical way possible.
As I have mentioned in a previous debate, the Secretary of State for Scotland has asked us to imagine the worst case scenario in all our considerations. That is what we seek to do in all our amendments—to minimise potential friction when the Scottish Parliament is set up.
There are two different parts to the West Lothian question. The first involves Scottish Members of Parliament of this House affecting and voting on English issues, where English Members of Parliament cannot affect the same issues in Scotland. The second part involves Scottish Members of Parliament in this House affecting English issues, when they themselves cannot affect Scottish issues in their constituencies, as a result of a devolved Parliament having been set up.

Mr. Swinney: Will the hon. Gentleman give way?

Dr. Fox: I have hardly said anything yet. However, I shall give way to the hon. Gentleman, whose intervention will be as relevant when I have said nothing as when I have said something.

Mr. Swinney: I am grateful to the hon. Gentleman for his generosity. Will his arguments tonight be the same arguments deployed by the Conservative party at the next sitting of the Committee when this debate will be continued, bearing in mind that the Leader of the Opposition is making a landmark speech on this subject tomorrow evening?

Dr. Fox: There is obviously some confusion of terms if "generosity" is how the hon. Gentleman sees me registering despair—but, having heard the hon. Gentleman's intervention, I understand why. If the hon. Gentleman reads my right hon. Friend's speech, he will realise that the Conservative party has moved on. We have done so because events have moved on. We did not seek to have a debate on the changing constitutional relationships within the United Kingdom, but that debate has come about because of the result of the referendum. We campaigned, I believe honourably, for our point of view—that is what one does in a democracy—but that view was rejected and instead the Scottish electorate voted for the establishment of a Parliament, with tax-raising powers. That is where the debate now starts.
I say to one or two of my hon. Friends on the Conservative Benches and to some in my party outside the House that to talk of an evolutionary approach to the constitution, when the Government's agenda is to throw up the pieces of the jigsaw of constitution and hope that they fall down in something like a coherent manner, is no longer on the menu for our party. We must move on and address the issues as they are presented, and do so within

the Government's time scale. However, that does not mean that we should not deal with the issues in an intellectually coherent manner. The debate that we are having is an inevitable result of what has happened in recent months, not least the election of a new Government.
The are several ways in which we can respond to the West Lothian question, but we cannot answer it. As I have said previously, there is no answer to the West Lothian question within devolution, because devolution pretends, wrongly, that we can change the constitutional relationship between Scotland and the remainder of the United Kingdom without changing the relationship within the remainder of the United Kingdom.
We must do what we can to deal with the question, and several options are open to us. There is the option to do precisely nothing—to make no change to our arrangements here or to our other constitutional arrangements, and just wait and see what happens. That is not a particularly constructive approach.
There is the possibility of developing English regional assemblies, moving down the federal path. The small problem with that, and something I find rather interesting when studying the Scottish media, is that it appears to be of no importance to certain political traits in Scotland that there is no demand for English regional government. Indeed, there is so little appetite for the proposed regional development agencies—the precursors for English regional government—that we wonder whether, if regional government will ever come.
A third option would be to set up an English Parliament, a separate body elected in the same way as the Scottish Parliament and with devolved powers set out in the same manner as the devolved powers for the Scottish Parliament are set out in the Bill. We could also have designated English legislation—which is dealt with in new clause 16—but there are drawbacks to that proposal, which is favoured by many. Who will decide what is to be a designated English Bill? Should it be left to the discretion of Madam Speaker? It would be a heavy burden for any constitutional politician. If it is to be decided by a resolution of the House, would Scottish Members vote on what should be an English-designated Bill? The practical difficulties would be enormous.

Mr. Wallace: The hon. Gentleman will be aware that the decision on whether Bills should be sent, for example, to the Scottish Grand Committee, is made by Madam Speaker, who has to determine whether a Bill relates exclusively to Scotland. Why should Madam Speaker have any greater difficulty in determining whether a Bill relates exclusively to England?

Dr. Fox: That is a matter of degree. We have a Scottish Grand Committee. There could be an argument for an English Grand Committee operating in the same way, but there would be a problem of scale with such a Committee. That is not an insurmountable difficulty, but it is not sensible to pretend that it does not exist if we are to have a rational debate on how to proceed. We could have English only—or English and Welsh only—sessions in the House, which would effectively be an English Grand Committee, as is suggested in new clause 19. All the options will have to be considered. If the hon. Member for North Tayside (Mr. Swinney), who is about to leave, would like a copy


of the speech to be made tomorrow night by my right hon. Friend the Leader of the Opposition, I shall send him one, so that he does not feel that he has missed anything from the rest of the debate.

Mr. Edward Leigh: As the principal Opposition spokesman on the amendment, my hon. Friend is rightly posing a series of questions. Is he aware that most Conservative Members of Parliament have a forthright view on the issue? We are not prepared to accept Scottish Members being able to come here to vote on matters over which we have no control in Scotland. They must accept either that such Bills should be marked or that their representation should be reduced. There is increasing anger on the Conservative Benches about that. We want the Government to address those issues firmly, properly and fairly.

Dr. Fox: My hon. Friend makes the points more clearly than I could. Devolution will inevitably create tension in the House and the United Kingdom unless the West Lothian question is addressed swiftly. There will be a feeling that Scottish Members have undue influence over affairs in England, with no reciprocal arrangement.

Mr. Ian Davidson: Does the hon. Gentleman recall the poll tax? A majority of English Members voted through a tax that at one time applied only to Scotland. Does he recognise that at no time will Scots form a majority in this Chamber, as the English Tories did when they voted for the poll tax to operate in Scotland? Does he not accept that such behaviour, not the anomalies that we might have now, threatens the Union?

Dr. Fox: Several responses immediately come to mind. England accounts for around 90 per cent. of the UK population. It will inevitably provide the largest number of Members in a united Parliament. The hon. Gentleman would do well to remember that, in recent weeks and again tonight, he has voted for clauses that give the English Parliament the same rights to impose legislation like the poll tax that he so abhors. Clause 27(7) made that clear—

Mr. McAllion: Does the hon. Gentleman realise what he has just said? He said that we voted to give the English Parliament the right to legislate over Scotland. I hope that, as a Scotsman, he will retract that abhorrent statement and remind himself that this is the United Kingdom Parliament, not an English Parliament.

Dr. Fox: I meant the Union Parliament. One of the things that I hate most, particularly when I am watching football, is for the United Kingdom to be referred to as England. Even worse is Scotland being referred to as England.
Clause 27(7), which we debated recently, gives this House a right to legislate on all matters, including economic matters. The hon. Member for Glasgow, Pollok (Mr. Davidson) voted for that power. If it is ever used, he should remember that. Even if I accepted what he said about undue influence in one direction—which I do not—there is no excuse for similar influence in the other direction. We must have a clear relationship with no

potential for English Members of Parliament to feel that they have too little influence over affairs in other parts of the United Kingdom when Members of Parliament from that area have an influence over their constituencies. It is simply a matter of fairness, given that we have already started down the road of devolution. It is a matter of balance—[Interruption.] Hon. Members talk about fairness, but if they are as stubborn as those who refuse to accept that we have now entered a new constitutional landscape, it will lead to the break-up of the United Kingdom and play directly into the hands of the nationalists who seek to maximise friction through the Bill.

Mr. Salmond: Will the hon. Gentleman give way?

Dr. Fox: How could I mention Scottish nationalists without giving way to their current personification?

Mr. Salmond: Personification—that is good; I quite like that. On the subject of friction, Sir Malcolm Rifkind, one of the hon. Gentleman's former—defeated—colleagues, said yesterday that if an English Grand Committee were set up and if the House overruled that Committee, he could see that leading to a constitutional crisis. Does the hon. Gentleman think that if clause 27(7) were used to overrule a Scottish Parliament, that would lead to a constitutional crisis?

Dr. Fox: We remain a Union Parliament, and clause 27(7) simply states what we are—the supreme law-making body in the United Kingdom. My former colleagues, like my current colleagues, are entitled to their views. It is a testament to the current resurgent intellectual health of the Conservative party that we are having such a wide-ranging and fruitful debate. [Interruption.] Of course I am smiling; I am looking forward to the future when, as a resurgent, intellectual Conservative party, we take more than a large share of seats in the Scottish Parliament.
Amendment No. 258 deals with the relative size of electorates.

Mr. Dalyell: It is just a thought, but would the hon. Gentleman have said that when he was a junior Foreign Office Minister?

Dr. Fox: As a junior Foreign Office Minister, I would not have presumed to say anything about Scotland. Given my departmental remit, I was happy to comment on the constitutional relationships in Sri Lanka and Nepal, but I would not have dared to stray on to the territory of the Scottish Office.
Amendment No. 258 deals with the relative size of the electorates who will return Members to this House. We have to ask in all seriousness why Scottish Members of Parliament should have the same size of electorate as proposed in the Bill to come to this House when they will not be dealing with the same work load as Members representing seats in England and Wales. The Scottish Members who come to this House will not be dealing with health or education, but, as the hon. Member for Dundee, East (Mr. McAllion) said, those issues take up two thirds of his work load. To tell the electorate that they must send


a Member of Parliament to the House of Commons to do a third of the work that Members in England are doing would smack very much of snouts in the trough. I admit that that mentality is currently the hallmark of the Government, but it is not a sound constitutional model for the future.

Mr. William Cash: My hon. Friend is deploying some very profound arguments. He has dealt with the West Lothian question, representation at Westminster, and the relationship between ourselves and the proposed Scottish Parliament. Will he explain why we are on a one-line Whip, given that we are debating a fundamental matter that affects the very future of the United Kingdom?

Dr. Fox: I think that it would be out of order to discuss such matters, and the party's internal organisation is not a matter for me at this point. or, with respect, for the Committee.
Amendments Nos. 259 and 260—[Interruption.] I have not eyes to see.

Mr. Salmond: Within the sight of the Committee, an hon. Member made an intervention and is now being spoken to by a Conservative Whip. I hope that no restraining influence is being used, against the procedures and wishes of the House.

The Chairman: Order. I think the hon. Gentleman is in danger of compounding a felony.

Dr. Fox: I always thought that the hon. Gentleman was fully in favour of rehabilitation.
Amendments Nos. 259 and 260 deal with the timetable for the implementation of the Bill and the setting up the Scottish Parliament. We feel that it should not commence until the next report of the boundary commission as it affects Scotland. There is a simple, practical reason for that. The Scottish Parliament will be set up with about 129 MSPs. Yet, under clause 81, within the first term of the Scottish Parliament their number will be reduced. It does not seem a stable, practical basis for setting up a Parliament to say to the newly elected MSPs, "Off you go to Parliament, all 129 of you but, by the way, in the first term your numbers will be cut and some of you won't be there the second time around." That is hardly a recipe for harmony. Surely it makes sense to set up the Parliament with the numbers that will run for several terms. Would that not be a far more stable and sustainable basis on which to set up any new legislative body?

Sir Robert Smith: Does the hon. Gentleman not realise that the previous Government established a principle of exactly the opposite only a few years ago when they set up Aberdeenshire council with 47 councillors, only to inflict a boundary commission review increasing that number to 68?

Dr. Fox: If the hon. Gentleman found that so unpalatable, I am sure that he will support our amendment. Having experienced something that he did not like, he should try to avoid it happening again. That is what we are seeking to do. It is typical of the Liberal Democrats with their recent defector recruits—if I said

defective, I apologise—the party for whom the Bells toll, that they should try to apply something that they do not like out of some bizarre sense of consistency, irrespective of the damage that it might do.
We are making a sound and practical proposal. As there will be a problem of relative over-representation in Scotland, why can we not have a single boundary change to establish the number of MSPs after the first election? Our amendments seek to introduce equality that does not exist in current legislation.
I am conscious of the time and I know that other hon. Members wish to speak as there are important issues to be considered. I know that my hon. Friends want to discuss some of the specific options in detail, but what is not on offer is that we do not address the West Lothian question. Some Labour Members profess themselves to be Unionists and I take no issue with their integrity on that, but if they wish to preserve the Union and want the new constitutional relationship to work, the problem must be addressed. Not addressing it will trigger a residual English nationalism which is just as potentially destructive for the Union as Scottish nationalism.
We all want to see patriotism in our politics, but we should avoid nationalism tinged with xenophobia. That is the issue which the House has to discuss and, if we get the arrangement wrong, it is not we who are doomed, but the Union itself.

Mr. McAllion: I shall be brief to allow the European experts to try to channel the debate into European byways, but I have to quarrel with the final sentiments of the hon. Member for Woodspring(Dr. Fox), who tried to draw a distinction between patriotism, which was wholly good, and nationalism, which was wholly bad. The hon. Gentleman knows very well that it was a false distinction.
Nationalism is not a single beast. There are different varieties of nationalism. It can be well argued that some of the speeches by Conservative Members—particularly those who regard themselves as Eurosceptic—are nationalistic. It seems that British nationalism is fine, but any other nationalism—Scottish, Welsh or Irish—is bad. That is not an acceptable distinction. If I were to draw such a distinction, it would be between ethnic nationalism, which is bad and should be rejected wherever it raises its ugly head, and civic nationalism, which is a good and progressive force that can be found all over the world spreading democracy and increasing the rights of ordinary people whatever their ethnic background. It is civic nationalism which is wound up in the Bill—a nationalism that gives the people who live in Scotland, no matter who they are, the same democratic rights as can be expected by people living in any other democratic society.
I strongly oppose the Conservative amendments because, if they have a unifying theme, it is to punish the Scots—to have a go at the Scottish Members of Parliament who remain here after a devolved Parliament is established in Scotland. In one way or another, the amendments punish Scottish Members. Their constituencies have to be bigger than the constituencies of other Members of Parliament—the figure produced is 120 per cent. The Opposition do not want parity between Scottish, English and Welsh constituencies; they want Scottish constituencies to be bigger than those elsewhere


in the United Kingdom; and they want the Scots to be treated differently from people living anywhere in the United Kingdom.

Mr. Collins: The hon. Gentleman is making a case for parity between all parts of the United Kingdom, but that is what we have now in the United Kingdom Parliament. It is Labour which seeks to break that parity by establishing a separate Parliament in one part of the United Kingdom.

Mr. McAllion: We do not have parity: nor am I arguing for parity. But neither are the Opposition arguing for parity. They want to discriminate against Scotland. They want Scottish constituencies to be bigger than any other constituencies in this Parliament. I regard that as punitive against Scottish Members of this Parliament in that it treats them differently from any other Member of the United Kingdom Parliament. That is not a constructive attitude to be taken by the official Opposition at a time when they do not have a single Member representing a Scottish constituency.

Mr. Grieve: I appreciate the hon. Gentleman's point, but several amendments have been tabled and they would have different effects. Is not one of the central issues that although the Government have accepted that there will have to be a change in the number of Scottish Members of Parliament, they will not accept that that change should be made at the same time as the Scottish Parliament at Holyrood starts? Does the hon. Gentleman think that that is justified and that the over-representation thereafter should continue?

Mr. McAllion: I do not think that the change is justified at all. I remember that, for a long time when we were in opposition, we argued against any change in the constituencies and said that it was completely irrelevant to change the size of Scottish constituencies, because Scottish Members would still have a role to play in this Parliament.
In any case, changing the size of Scottish constituencies does not affect what the Conservatives identify as the West Lothian question. What does it matter whether there are 73, 58 or 49 Scottish Members of Parliament? They will still be doing the same thing to which the Opposition object—voting on English and Welsh matters. Changing their number is neither here nor there.

Mrs. Laing: The hon. Gentleman just said that Scottish Members of Parliament after the formation of the Scottish Parliament will be doing the same thing, but that is not true. They will not have nearly as many duties to perform on behalf on their constituencies as Members of Parliament currently have or as Members of Parliament who are not Scottish Members will continue to have after the Scottish Parliament has started, because so many matters will have been devolved to the Edinburgh Parliament.

Mr. McAllion: The hon. Lady completely misunderstands. Whichever Members get sent down from Scotland to represent Scottish constituencies in this Parliament will do exactly the same sort of work as other

Members of Parliament. They will be here every night, voting in the Lobbies on every single issue and it is their right to do so, because this is a United Kingdom Parliament.
If the English people choose to have their domestic legislation dealt with in the United Kingdom Parliament, there is a price to pay for that choice. The price is this: whichever Members of that United Kingdom Parliament are here have a right to vote on that legislation. If the English Members do not like that, they have an alternative: they can go down the Scottish road, go back to their constituencies and around the country and argue for English devolution within a federal set-up. None of the Opposition Members have ever made any attempt whatsoever to do that. They have simply come here and whined and pined about how their rights as individual Back Benchers will be different from those of Scottish Members of Parliament. They should go back and talk to their constituents, because I do not detect anywhere in England the upsurge of feeling against Scotland that they talk about.

Mrs. Teresa Gorman: Will the hon. Gentleman give way?

Mr. McAllion: The hon. Lady is on her own—we all know that she is a bit benighted, but she is the only one who continually froths at the mouth about Scottish devolution. Even her own constituents are not that concerned about it, but I shall give way so as to allow her to froth once more.

Mrs. Gorman: I thank the hon. Gentleman for stopping frothing at the mouth for a moment. I rise only to point out that I have made the case in the House on a private Member's Bill for an English Parliament to mirror the powers, privileges and exemptions that the Scottish Parliament will have.

Mr. McAllion: I know that the hon. Lady has made the case in the House but how much campaigning has she done out on the stump around England? [Interruption.] The hon. Member for Rochford and Southend, East (Sir T. Taylor), who used to represent Glasgow, Cathcart, made some comment from a sedentary position that I could not hear. He paid the price for not listening to the campaign for Scottish devolution. He was kicked by his Scottish constituents. His was the first Tory head to roll because the Tories would not listen to what the Scottish people were saying. If they had paid attention when he lost his seat they might still have a presence in Scotland.
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The continual refusal to listen to what the Scottish people want explains why the Conservatives have collapsed in my country. I remember, or rather I have read in history books, that 60 or 70 years ago, Scottish Members moved legislation for a Scottish Parliament in this House. They were laughed at. No one paid any attention to them but that did not stop them. They campaigned, kept up the fight, spoke to others and kept the idea alive. At the end of the trail, we are debating what they fought for all those years ago. It is the absence


of that sort of fight in England which means that the Tories have no right to tell us that we cannot have our Parliament now.

Mr. Salmond: Is not the hon. Gentleman underestimating the intellectual ferment that we were assured the Conservative party was in?

Mr. McAllion: I never underestimate the Conservatives; I thought that they might win some seats at the general election. I was proved wrong then and I am sure that I would be proved wrong now if I said that there was intellectual ferment among Conservative Members. They are all just sitting there like dummies. [Interruption.] Well, they are. I can only say what I can see, though I am not wearing my glasses.

Mr. Gerald Howarth: rose—

Mr. McAllion: The top dummy is up.

Mr. Howarth: I will see the hon. Gentleman outside afterwards, after that profoundly offensive remark. If he had not been such a dummy himself, sitting in the Tea Room or wherever it was—

The Chairman: Order. I think that a bad example has been set. I do not think that such words add to the dignity of Parliament.

Mr. Howarth: I am sure that they do not.
If the hon. Member for Dundee, East (Mr. McAllion) had been here throughout our earlier proceedings, he would have seen that many of my hon. Friends participated in the debates and that the expression that he used was therefore wholly inappropriate.

Mr. McAllion: I was not here earlier because I was attending a meeting in Committee Room 10. I was not sitting in the Tea Room but was carrying out my duties as a constituency Member of Parliament, looking after foreign affairs and trying to stop the war in the Gulf. There are other issues that affect Scottish Members that would require them to come here to debate after we have our own Parliament in Scotland.

Dr. Fox: I hate to bring the hon. Gentleman back to real world, however temporarily, but when he says that he thinks that the demand for Scottish constitutional change was overlooked for too long in England, he is making exactly the same mistake in thinking that he can impose a view of constitutional change on the English without their having anything to say about it. It is a grave mistake to think that the English, who constitute 90 per cent. of the UK population, will not have a view. He is in danger, through his comments, of putting the Union at risk.

Mr. McAllion: It is an oxymoron to talk about bringing me back to the real world in a debate in this place. Nothing could be further from the real word than our debates. Labour Members are not imposing anything on the English people. It is for the English people to articulate their demand for English home rule. Conservative Members can sit here all night saying what

they think, but they must remember that, at the general election, they were defeated in England, just as they were in Scotland. They do not represent the voice of the English people. What they call for is not what the English people are calling for. When the English people legitimately call for their own Parliament and home rule, the Labour party and Government will support it; they would be mad not to.

Mr. Hayes: Will the hon. Gentleman or, failing that, perhaps the Minister later comment on the issue first raised in the House on 1 February 1977 by the hon. Member for Linlithgow (Mr. Dalyell), then the hon. Member for West Lothian, about whether following devolution, Members of this House would have the right to raise questions that are within the jurisdiction of a Scottish Parliament? If the hon. Member for Dundee, East (Mr. McAllion) cannot answer that, he is imposing significant restrictions on the rights of English Members.

Mr. McAllion: Any hon. Member would be entirely free to write to their equivalent Member of the Scottish Parliament and ask them to raise such issues in the Scottish Parliament. I am not trying to stop them doing that.
Devolution is a response to the democratic demands of the Scottish people. They have asked for their own home rule parliament. This Parliament, in its wisdom, has decided to honour the Labour party's manifesto commitment following the election of the Labour Government. There is nothing untoward in that. Conservative Members keep pointing out anomalies because a Scottish Parliament will exist in what used to be a unitary United Kingdom. Of course there are anomalies—but what about the anomalies before? When did we hear Conservative Members complaining about the way in which the poll tax and local government reorganisation were imposed on Scotland when nobody in Scotland wanted it? In the general election in 1992, 75 per cent. of the Scottish people voted against a Tory Government, but had one imposed on them. What about the sensibilities of Conservative Members then? There was not a whisper from them about any anomaly or inconsistency or anything being intolerable to the Scottish people.
I return to the point that I made at the beginning of my speech. The amendments' unifying theme is very much in line with what the Tories did for the past 18 years in Scotland. It is against the Scottish people and against their interests. Their constituencies would have to be bigger, and when their MSPs were sent down here they would be stopped from taking part or voting in certain debates. That is not as bad as the poll tax and local government reorganisation, but it is in the same vein. The Conservative Opposition have yet to learn the lesson of the general election defeat. It is time that they started listening to people in the constituencies in which they are trying to be elected, instead of telling them what they should be thinking.

Mr. Cash: Does the hon. Gentleman accept that a vast amount of money is being paid to the Scottish people as a result of the United Kingdom Parliament's decisions? Whether or not that is justified, it blows a hole in his argument. Furthermore, the amount of money that is being paid as a result of the Bill—the effect of giving


jurisdiction to the Scottish Parliament with regard to education and all the range of reserved matters—indicates the huge gulf that the Government are creating between the Scottish people and those in the rest of the United Kingdom. The hon. Gentleman's argument is completely flawed because, on one hand, money is largely being provided by taxpayers south of the border, and on the other, jurisdiction is being given to the Scottish parliament. Is not that the very reason why the West Lothian question is so important and why Scottish Members should not be allowed to vote twice?

Mr. McAllion: That is simply not true. The hon. Gentleman is simply wrong when he says that the English are subsidising Scottish public expenditure. Earlier debates on the Bill have patently shown that to be false. He does not include in the calculations all the non-identifiable expenditure largely spent in the south-east of England, or North sea oil revenue, which has been used by the people in the south to subsidise mass unemployment for 20 years. There are all kinds of arguments. The West Lothian question is a problem only because it is a problem for the Conservative party. That is the nub of the argument.
Somebody mentioned that there was likely to be a speech tomorrow night by the Leader of the Opposition in which he will advocate that an English Grand Committee should be set up to deal—[HON. MEMBERS: "How do you know?"] How do I know? The spin doctors are writing in the press. How do I know what my own party is saying? I have to read it in the papers. It is the only way I know what is happening in this world.
The Leader of the Opposition's speech brings into question the remarks made by Mr. Malcolm Rifkind, who used to be a very senior figure in the previous Government.

Hon. Members: Sir Malcolm.

Mr. Davidson: He did not beat his wife.

Mr. McAllion: The last thing that I want to do is to involve Sean Connery.
Malcolm Rifkind argued that were this Parliament to overrule the decisions of an English Grand Committee, it would lead to a constitutional crisis. I remember Malcolm Rifkind, Mr. Forsyth and others in the previous Parliament arguing that the answer to the Scottish problem was to set up a Scottish Grand Committee, which would be overruled when it suited the House of Commons. They did not see any constitutional crisis when they were in government. They only see constitutional crises when they are not in government. When will the Conservative party stop being an English nationalist party? There is no constituency even in England for such a party. The English people rumbled the Tories a long time ago. When will they begin a productive relationship with the peoples of this United Kingdom?
There is one amendment that I do not completely rule out—the one dealing with changing the boundaries for a Scottish Parliament. In the constitutional convention, there was a clear commitment on the part of all its members that there would be a separate boundary review

for the 129 Members of the Scottish Parliament. I will never accept that, just because the number of Scottish Members at Westminster is reduced, the number at the Scottish Parliament must automatically be reduced, too. We in the convention committed ourselves to honouring the 129 Members of the Scottish Parliament by allowing them a separate boundary review. I hope that the Government will remain true to that commitment.

Mr. Ancram: The hon. Gentleman has reached an important point in his speech—[Laughter.] It is about the only important point in it. What he suggests is not, in fact, in the Bill. However many Scottish MPs are removed by the boundary review from this House, there will, under the Bill, be a commensurate reduction in directly elected seats and regional seats in the Scottish Parliament. That is what the Bill says: will the hon. Gentleman support the Bill?

Mr. McAllion: The clauses dealing with that were not debated tonight owing to the timetable, but it is a serious issue which will have to be debated. What the right hon. Gentleman describes does not tally with the commitment that the Labour party gave in the constitutional convention. We rightly make great play of honouring the commitments that we gave in that convention. Here is one commitment that we should honour; I shall continue to support it.
The Opposition are for ever saying that the English people are Unionists. Being Unionist is not the same as being anti-Scottish. That is a distinction which they fail to make. The Opposition seem to think it impossible to be a good Unionist without being prepared to put the boot into Scotland and Scottish interests. They cannot conceive of a kind of Unionism that operates with Scotland and England being partners in a reformed relationship, a very different one from the sort of Unionism that they used to represent many years ago. Their type of Unionism died at the 1997 general election.
If there is to be a Unionist future, it will be very different from anything the Opposition recognise. The sooner they understand that, the better.

Sir Teddy Taylor: Although we should all be grateful to the hon. Member for Dundee, East (Mr. McAllion) for preventing war in the Gulf, as he apparently did in a Committee Room this evening, he may have made some mistakes when assessing the current situation. For instance, he made a vicious personal attack on me, saying that I had lost my seat in Scotland because I had failed to listen to people's views on devolution.
There are probably many reasons why I was thrown out of my seat, but, in 1979, there was a vigorous Conservative party in Scotland which was absolutely opposed to devolution. We fought the battle hard and wiped out the SNP from the House of Commons. The SNP's 11 Members of Parliament were knocked for six. Unfortunately, because the nationalist vote collapsed on that occasion, and because I depended on an adequate SNP vote, I was thrown out at the same time.
I had warned the Prime Minister, Lady Thatcher, who had told me to eradicate the SNP, that that would mean eradicating me, too. It appears that she, having considered the bargain, was willing to take the risk.

Mr. Salmond: The hon. Gentleman has cheered me up a great deal. I now realise that there was a silver lining to


the 1979 general election result. He speaks of the SNP being eradicated at that election. True, we did not do very well; we had only two seats left. But eradication means having no seats, as the Conservatives in Scotland have now.

Sir Teddy Taylor: The hon. Gentleman is right. Losing nine of 11 seats is a substantial reduction, shall we say? The lesson presumably was that supporting the nonsense of devolution does not necessarily knock the SNP for six.
I was also astonished by what the hon. Member for Dundee, East said about the size of constituencies. He said that we should not change the arrangements and have larger Scottish constituencies. I tried to understand the logic of that assertion. He seemed to be saying that my constituents who live in multi-storey flats are not as important as his constituents who might live in bungalows with big gardens. Trying to calculate an hon. Member's significance according to size of constituency or size of property would lead to constitutional madness.
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The hon. Gentleman said, finally, that if the English do not like the Bill, they can have their devolved Parliament too. Can there be a sillier answer? I know that my hon. Friend the Member for Billericay (Mrs. Gorman) has tabled an extremely sensible private Member's Bill that has made many people think about the issue, but why should we land ourselves with a separate assembly with lots of extra Members of Parliament all of whom want secretaries and researchers and to go on trips to the United States and Canada to study devolution there? Why should we undertake the huge responsibility of paying for all that?
One of these days, the hon. Gentleman will have to tell the people of Scotland what he has done to them, and the cost that they must pay for it.

Mr. McAllion: The hon. Gentleman is missing an important part of the scenario for England, which is the massive reduction of seats in this place. That would be warmly welcomed by people across the United Kingdom. The House of Lords could be turned into the House of 200, and that could be the federal Parliament, so we could do away with this House entirely.

Sir Teddy Taylor: I am trying to present a logical argument. I do not understand what the hon. Gentleman is getting at. I am told that the House of Lords has 1,500 members and is the cheapest assembly in the world. It may not be the most logical one, but it works, which the Scottish Parliament will not do for the United Kingdom.
I have noticed in the debates on Scottish devolution that every minute there is less enthusiasm for the idea. When we started, there was a huge amount of enthusiasm for a devolved Parliament, but now we see it fading away. Those who think about the matter seriously—there are some hon. Members on all Benches who think about it seriously—have suddenly realised the significance of clause 33.
The first time a Secretary of State tells the Scottish Parliament, "I'm sorry, that law is dead," that will be the beginning, as Scottish National party Members are well

aware, of a deep division. When the Scottish Parliament says, "We believe that this is okay constitutionally," and the English Parliament says, "No, the legislation is dead," there will be a terrible problem. Having lived in Scotland for most of my life, I know what that will mean.
We have just been talking about taxes and the problems that will arise. Hon. Members on the Government Front Bench are well aware, as the Conservatives learnt to their cost, that the problem of SNP-ism—the problem of the desire for independence—is not solved by offering a halfway house. It does not work and it will not work.

Mr. Salmond: Is the hon. Gentleman's conclusion, then, that this Parliament cannot overrule a Scottish Parliament without division? Presumably this Parliament could not abolish a Scottish Parliament without division, so what is his conclusion?

Sir Teddy Taylor: My conclusion is that the structure of the devolved Parliament is such that, as the hon. Gentleman is well aware, it will lead to bitter division between Westminster and Edinburgh and will lead to the kind of fracas that will destroy our nation. The evidence is clear. The hon. Gentleman knows that, when devolution gets going, his party will have a great future. It may be good for Scotland; it may not. People should wake up to what will happen.

Mr. Hayes: Is not my hon. Friend drawing attention to what has been described as the balkanisation of Britain? It was described as such by John Strachey, who was the Member of Parliament for Dundee, West, I think. Perhaps that suggests that the west of Dundee has a greater propensity for intellectualism than the east.

Sir Teddy Taylor: John Strachey was in charge of food rationing and ran an admirable system whereby he saved public expenditure by making the food coupons so small that people who did not have glasses could not read them. That certainly saved expenditure, which was important.
If we are to proceed with the Bill, we must sort out the problem in a sensible way. My hon. Friend the Member for Aldridge-Brownhills (Mr. Shepherd) and I have put forward a suggestion. If hon. Members do not like our idea, what do they suggest? In the old days—I am one of the oldest Members here—people used to face up to problems. A great chap called Gladstone was a wonderful Prime Minister and a Liberal Democrat. He introduced a Bill about Ireland in 1893. He wrote clearly and precisely in the Bill that the answer to his devolution proposal was to have no Irish Members in this Parliament. That caused a great deal of distress and concern in Ireland, but at least he faced up to the issue and said, "This is my idea."
Another great chap was Harold Wilson from the Labour party—in fact, he is one of my favourite Prime Ministers. He was not terribly popular with some, but I thought that he was a gem. He faced up to the situation. Unlike many in the Labour party, Harold Wilson was a gentleman. He said that the devolution problem could be solved if people "considered their position." Basically, he told the Members of Parliament from Northern Ireland that, if they were to get devolution—which he thought was a good idea at the time—they must consider their position when issues are raised in this place that related not to Northern Ireland, but to England, Scotland or Wales.
Harold Wilson suggested tackling the problem through honour. He wanted all Northern Ireland Members to say, "This is not our business, so we will go home and study other matters or serve on a Committee and see if we can improve the situation in Northern Ireland." If everyone had been as honourable as Harold Wilson, there would have been no problem. Sadly, things do not work out like that. We simply cannot solve constitutional problems by appealing to people's honour—particularly in a narrow situation such as this.
So what can we do? My hon. Friend the Member for Aldridge-Brownhills and I have made a suggestion in proposed new clause 6.

Mr. Dalyell: As the hon. Gentleman can imagine, I had several meetings in the middle 1970s with Harold Wilson about the devolution question. The difficulty—as he would eloquently put it—was that the Irish never failed to ask for certain favours in return, especially when it came to the nationalisation of steel and problems with the late Woodrow Wyatt and the late Desmond Donnelly. There is a price to pay for playing that game.

Sir Teddy Taylor: The hon. Gentleman is absolutely right. He points out the logic of the situation: if we rely on people being gentlemanly, we sometimes find that the so-called gentlemen will exact their price. There was no steel in Northern Ireland, so the Irish Members of Parliament said, "If we are to act like gentlemen, we want something for it; if the Government have a narrow majority, we want something in return." That is the trouble with running things on the basis of all being gentlemen together. There will always be rascals: someone will say, "I'll be a gentleman if you pay my price"—which might be a trip to South America, a place on the Front Bench or dinner with one of the party Whips. There are many prices, and we cannot pay them all. That would prove very expensive indeed.
So what shall we do if we are not going to try to solve our problems by having dinner with the Chief Whip? The answer is simply that we must do something. My hon. Friend the Member for Aldridge-Brownhills and I have made a simple suggestion. New clause 6 says that, from the beginning of the new Scottish Parliament:
no member of the House of Commons representing a constituency in Scotland"—
whether it has multi-storey flats, bungalows or anything else—
shall be entitled to vote in that House on any matter … relating solely to another part … of the United Kingdom.
That is a sensible suggestion.

Sir Robert Smith: While I appreciate that the principle behind the proposed new clause is sensible, does the hon. Gentleman realise that, for the first year, the Scottish Parliament will meet as a shadow Parliament with no responsibility for Scottish affairs, so the consequence of his new clause would be to allow English Members to have a say in Scottish affairs for one year while denying members of the Scottish Parliament any say in English affairs? Perhaps the hon. Gentleman might think about

withdrawing his proposed new clause, which is flawed, while recognising that the Government may accept the principle behind it.

Sir Teddy Taylor: That is a very sensible and helpful suggestion. If, like the Liberal Democrats, the Government can respond positively, I shall be happy to withdraw the new clause. If the Government say that my hon. Friend the Member for Aldridge-Brownhills and I have not got it exactly right, but that they accept the principle behind new clause 6 and promise to introduce an even more sensible measure that takes account of the problem, I shall happily withdraw it.

Mr. Davidson: Would the hon. Gentleman intend to apply the same principle to the Natonal Assembly for Wales, to London because of the London authority and to any northern assembly that might come about, or are we faced simply with an anti-Scottish measure?

Sir Teddy Taylor: In no sense is the amendment anti-Scottish. I am trying to protect the United Kingdom. I am trying to safeguard the people of Scotland and the people of England because I love them both equally. I can assure the hon. Gentleman that there is no question of my being anti-Scottish.
I say to the hon. Gentleman honestly and seriously that if he thinks that we can have a similar answer for the regions, he is living in cloud cuckoo land. I know that he is a busy person who takes an interest in many things—perhaps helping the hon. Member for Dundee, East to stop war in the Gulf—but he should think about the English regions. No one wants them, apart from people in the north-east of England, who seem to think that a regional system will help them to receive the same Euro-subsidies as they get in Scotland.

Mr. Davidson: The hon. Gentleman says that no one, apart from people in the north of England, wants regional assemblies. Has he taken London into account? I am not clear whether his answer is a yes or a no. Would he extend the principle to other areas that might have a form of devolved structure?

Sir Teddy Taylor: If people do not want regional government, cannot afford it and see no benefit in it, given the limited amount of certainty that is left we shall not find the answer by following that course. No one is suggesting that regional authorities should have the same powers as the Scottish Parliament. Those who follow these matters carefully will understand that these proposals are being shoved on us because of pressure from the European Union, which wants regions established throughout Europe and the abolition of democratic national Parliaments.
We must face the problem. If my suggestion is unacceptable, what should we do instead? We cannot look forward to the future with an Assembly that will do huge damage to the present Government and to Scotland, but if we are to have such an Assembly, let us not turn it into a constitutional nightmare. Unfortunately, we shall face such a nightmare if something is not done along the lines that I have suggested.
I appeal to the House of Commons to realise that something must be done. My hon. Friend the Member for Aldridge-Brownhills and I have openly, fairly and clearly


made a suggestion. If we are wrong, what suggestion should take its place? If nothing is done the foreseeable nightmare will become even worse.

Mr. Dalyell: I shall reply in some detail and seriousness to the hon. Member for Rochford and Southend, East (Sir T. Taylor). He said at the beginning of his speech that we are confronted with a problem that faced a man called Gladstone. That certainly was the case. Morley's biography of Gladstone describes in detail the problem that Morley called the problem of the ins and outs. Joseph Chamberlain followed, with similar results. The proposed answer was unworkable for a simple reason—there is such a thing as the Treasury.
It is all very well having dispensations and people acting honourably and saying, "All right, we won't vote on certain matters." If there is a Government with a large majority, that may be possible, but if there is a Government with anything like the majorities of the 1970s and the mid-1960s, that response is impossible because it becomes impossible to run any sort of economic policy.
So it was in Ireland. The hon. Member for Rochford and Southend, East knows his history. What about Carson? Carson said that it would be impossible in terms of Dublin government—this was in 1912—because the ins and outs would not work. One listens seriously to the hon. Gentleman, but if his proposal had been a possibility and if it had been workable, those clever men John Smith and Bruce Milian, and those equally clever men Sir John Garlick and Sir Michael Quinlan, would surely have alighted on it in the mid-1970s, but they turned it down as unworkable.
I shall not insult the hon. Gentleman by saying that it is an old chestnut—[Interruption.] It is not often that a Whip comes to sit beside me. I have to say that I am wearing the wrong glasses. I cannot read what the Whip was indicating.
I am in the position of the night watchman. The truth is that the enterprise on which we are embarked remains one of peculiar and, perhaps, unique difficulty. It is hard to find any significant example of an established semi-federal state—one in which a substantial proportion of the population are governed—
It being Eleven o'clock, THE CHAIRMAN left the Chair to report progress and ask leave to sit again.
To report progress and ask leave to sit again.—[Mr. Clelland.]
Committee report progress; to sit again tomorrow.

EUROPEAN COMMUNITY DOCUMENTS

Motion made, and Question put forthwith, pursuant to Standing Order No. 119(9) (European Standing Committees),

COURT OF AUDITORS REPORT FOR 1996

That this House takes note of Official Journal No. C348 of 18th November 1997, the Annual Report and Statements of Assurance of the European Court of Auditors concerning the

financial year 1996, on activities financed from the general budget and of the sixth and seventh European Development Funds, together with the Institutions' replies; and of European Commission Document No. SEM 2000/3(97) Doc. 5, the SEM 2000 Stage III Second Report on the Implementation of the Recommendations of the Personal Representatives Group on Sound Financial Management; endorses the Government's determination to ensure that taxpayers' money is spent efficiently and effectively in the EC budget; and welcomes the priority which the current British Presidency of the EU is giving to this subject.[Mr. Clelland.]

Question agreed to.

DELEGATED LEGISLATION

Mr. Deputy Speaker (Sir Alan Haselhurst): With permission, I shall put together the motions relating to delegated legislation.

Motion made, and Question put forthwith, pursuant to Standing Order No. 118(6) (Standing Committees on Delegated Legislation),

LOCAL GOVERNMENT FINANCE

That the Special Grant Report (No. 28): Persons from Abroad Children's Grant (HC 478), which was laid before this House on 26th January, be approved.

That the Special Grant Report (No. 29): Unaccompanied Asylum-Seeking Children (HC 479), which was laid before this House on 26th January, be approved.

That the Special Grant Report (No. 30): Asylum Seekers' Accommodation (HC 480), which was laid before this House on 26th January, be approved.

LOCAL GOVERNMENT FINANCE (SCOTLAND)

That the Special Grant Report for Unaccompanied Asylum-Seeking Children and Children of Asylum Seekers (No. 98/4) (HC 491), which was laid before this House on 26th January, be approved.

That the Special Grant Report for Adult Asylum Seekers' Assistance (No. 98/3) (HC 490), which was laid before this House on 26th January, be approved.

LOCAL GOVERNMENT FINANCE (WALES)

That the Special Grant Report (Wales) (HC 457), which was laid before this House on 26th January, be approved.—[Mr. Clelland.]

Question agreed to.

SELECT COMMITTEE ON MODERNISATION OF THE HOUSE OF COMMONS

Ordered,
That Mr. Joe Ashton be discharged from the Select Committee on Modernisation of the House of Commons and Mr. Stephen Twigg be added to the Committee.[Mr. Clelland.]

DEREGULATION COMMITTEE

Ordered,
That Mr. Oliver Letwin be added to the Deregulation Committee.—[Mr. Clelland.]

Orders of the Day — Multilateral Agreement on Investments

Motion made, and Question proposed, That this House do now adjourn.—[Mr. Clelland.]

Dr. Nick Palmer: I should declare a general interest: I act as consultant for my former employer, Novartis, a multinational company. However, I do not know its view on the multilateral agreement on investment, if it has one. It is perhaps also relevant to mention that I am a member of the World Development Movement, which has taken a critical view of the MAI.
I requested this Adjournment debate in view of the rather striking discrepancies between the official view of the MAI, as expressed by the negotiating Governments, and the fears expressed by the World Development Movement and other non-governmental organisations. I have the draft agreement, which is available in the Library for any hon. Member who would like a copy, and it contains both positive and negative potential. I should like to identify the areas of concern and ask the Minister either to dispel them or, where she agrees that there is a potential problem, to tell us whether the Government will fight for improvements.
The basic principle of the multilateral agreement—that there should be a common basis for attracting investment—is not necessarily controversial. The present patchwork of conditions and special arrangements around the world is profoundly unhelpful to companies with foreign investments, for companies that invest around the world, and, therefore, is particularly unsatisfactory for Britain, with its numerous major international investors.
Conversely, most of us on the left feel that multinational companies increasingly escape from all forms of control. If the agreement were to balance rights and responsibilities, it could be profoundly helpful. In fact, it could be more helpful than many national policies, to which we devote much more attention. I note that the Conservative Benches are entirely empty.
The usual objection to constraints on multinational behaviour is that companies may take their business elsewhere. With a potentially global agreement, and with a balance of rights and responsibilities, we could be less constrained, as we would have to worry about losing business only to little green men from Mars. Furthermore, the requirement that domestic companies should not be given unfair preference, although previously controversial, has now become the norm in most sectors in the developed world.
However, there are a number of matters of concern that, if true, would be major obstacles to acceptance in Britain and in most other countries. First, is it true that local authorities and national Governments will be prohibited not only from discrimination against foreign firms, but from certain types of ethical restriction, even if that ethical restriction is also applied to domestic firms? Could they refuse to give a contract to a firm believed to have used slave labour elsewhere, or to have treated unacceptably the work force, the environment or animals?
The disputed paragraph 4 in the draft treaty would explicitly allow such a restriction, at least for local behaviour: that is to say, behaviour within Britain. Will the Government fight for the retention of the wording of that passage, as it is clear that a number of delegations still oppose it?
Secondly, is it true that if developing countries later sign up, they will not be allowed to claim exemptions? If it would be by negotiation, will the Government commit themselves to ensuring that developing countries get a fair deal in those negotiations and are not forced to expose their fledgling industries to instant, massive competition? It is not 20 or 30 years since we in Britain felt the need to protect our industries by special legislation, and we should not expect less from developing countries.
Thirdly, given that multinationals receive considerable benefits from such a level playing field, would it not be reasonable to impose certain responsibilities? In particular, will the Government insist on the retention of the strict formulation of the section "Not Lowering Standards", including a ban on countries waiving labour and environmental laws to attract investment? Will there be any obligation to respect agreed international standards from other treaties, such as environmental treaties, and not just local treaties? If the Philippines wanted to attract investment to Manila, would it be able to say, "If you invest with us, you don't have to worry about that law. We'll waive it for you"? If the section that would rule out such behaviour retains its teeth, it will go a fair way towards making the treaty more balanced between rights and responsibilities.
Fourthly, France has said that it will not sign if the United States is given an exemption for the Helms-Burton law with its illegal boycott of Cuba. Given Britain's strong opposition to Helms-Burton, will we support the French stance? I see reports that President Clinton is seeking ways to soften the boycott. If we take him at his word, this agreement could give him useful ammunition. The boycott seems to be in clear contravention of the draft article on secondary investment boycotts, and if the multilateral agreement on investment will help us get rid of it, it would be an important point in its favour.
Fifthly, under that article would it still be possible to boycott countries that the United Nations agreed were violating international standards? That approach was effective against apartheid, and is currently being applied to Iraq. If South Africa still had apartheid, would it be illegal under the MAI for a local authority or government to campaign against the importing of South African wine?
The draft article on secondary investment boycotts prevents authorities in Britain from taking any account of how companies behave outside Britain, as long as the behaviour is locally legal and is not in conflict with international law. If that is so, the position needs to be modified to allow objections to companies that are violating not just international law, but United Nations resolutions. Otherwise, we should be in the absurd position of being suddenly forbidden to enforce the sanctions on Iraq in so far as they affected movements of capital. I cannot imagine that that would be the intention of most of the likely signatories.
Sixthly, is it true that trading pollution quotas for environmentally friendly technology, as envisaged at Kyoto, would be an illegal anti-competitive subsidy?
Seventhly, I understand that the United States is resisting the draft clause allowing increasing European Union integration, while insisting that US state Governments be allowed to maintain discriminatory practices indefinitely without any commitment to ever rolling them back. What is the Government's position on that?
Finally, it has been suggested that a partial agreement may be signed in April covering only some of the issues. Will the Government insist that that should not implement the free-trade aspects, while postponing the labour and environmental safeguards to a nebulous future?

Mr. David Heath: I am following the hon. Gentleman's argument closely, and agree with much of what he is saying.
The environmental study by the Organisation for Economic Co-operation and Development, commissioned at the behest of the British Government, was not discussed at the January OECD meeting. The Secretary of State for International Development has commissioned a study of the impact on developing countries, but we are told that it will not be presented until 23 March. Given those facts, does the hon. Gentleman agree that there is some logic in the Government's withholding signature in April, and delaying it until we have secured an agreement that satisfies us that all the impacts on the developing world and the environment can be properly addressed?

Dr. Palmer: I am grateful for that interesting intervention, but I think it is more a question for my hon. Friend the Minister, so I shall not attempt to deal with it.
I am aware that other hon. Members want to speak briefly before the Minister's reply, so I shall conclude my speech. If my hon. Friend can cast light on the issues that I have raised, she will have done a real service to a great many concerned individuals and groups and reinforced our commitment as a Government to an ethical foreign policy. This agreement has real potential. I hope that we shall make the most of it, and will not allow ourselves to be trapped into making an agreement that does not give the benefits for which we all hope.

Mr. Jeremy Corbyn: rose—

Mr. Deputy Speaker (Mr. Michael Lord): Order. It is normal in Adjournment debates for Members who wish to speak to have obtained the permission of both the hon. Member who has secured the debate and the Minister. Do I take it that that applies in this case?

The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): Yes.

Mr. Jeremy Corbyn: I shall be brief.
The House is indebted to my hon. Friend the Member for Broxtowe (Dr. Palmer) for securing the debate, and for putting his case.
When the Minister replies, I should be grateful if she would acknowledge some serious concerns about the MAI. First, the agreement promotes the unfettered power of multinational corporations—many of which are larger than national Governments, can move capital around the world at whim and yet can deny the movement of labour around the world at whim. That should be contrasted with the attempts of the International Labour Organisation to impose minimum standards around the world, with the welcome steps taken at Rio a few years ago in setting a worldwide environmental agenda, and with what was achieved at the Kyoto conference on climate change.
The MAI will increase world trade and the amount of transport of goods world wide, and I believe it will be very damaging to economies in the poorest developing countries in the world.
It appears to many people—not just those lobbying on behalf of aid agencies and others—that all the aces are being stacked in favour of the OECD members that are busy negotiating all kinds of get-out clauses and protections for themselves, while the world's poorest countries have no alternative but to sign the agreement, knowing that they will have no control over what multinational capital does in their countries about land ownership, import substitution or anything else that those countries may wish to impose in order to protect themselves and encourage development of the living standards of their people.
We are debating serious matters. The Minister should say that Britain will not sign the agreement until we are sure that it is environmentally sustainable and will not destroy the ability of poor countries to develop themselves rather than hand their economic development to international capital.

Ms Joan Walley: I congratulate my hon. Friend the Member for Broxtowe (Dr. Palmer) on securing the debate, for which many hon. Members are present. Perhaps the Minister will say whether we can have more time to apply the full parliamentary scrutiny that the subject of the debate requires. We would all appreciate that. Perhaps through our Select Committee procedure we could find an opportunity to investigate the matter in even greater detail. Hon. Members in all parts of the House are anxious to ensure that agreements are environmentally sustainable, and I emphasise that in this important debate.

The Minister for Small Firms, Trade and Industry (Mrs. Barbara Roche): I apologise to the House and to my hon. Friend the Member for Broxtowe (Dr. Palmer) for my late arrival. I missed his opening comments and my excuse is the vagaries of the House in Committee.
I thank my hon. Friend for raising the topic of the multilateral agreement on investment. He has done the House a great service, and the debate gives me an opportunity to bring hon. Members up to date on the agreement since our previous debate on the matter on 23 July last year. In that debate, I outlined the background and, I hope, corrected some of the misunderstandings about the MAI, which is currently being negotiated within the Organisation for Economic Co-operation and Development.
In the Government's view, the flow of investment across national borders is an integral and usually a welcome part of global economic reality. Britain has a particularly large stake in that in both directions, and it is difficult to imagine what the British economy would be like without the contributions of European, American and Asian companies. My hon. Friend spoke about that. We are second only to the United States in outward direct investment to developed and developing countries throughout the globe.
The United Kingdom has a strong interest in creating a framework in which foreign investment can prosper and make its full contribution to the global economy.


Above all, we must bear it in mind that the MAI is about non-discrimination. The idea is that foreign investors should be treated no less well than domestic investors or each other. Another key feature that is planned for it is a binding dispute settlement system that will cover state-to-state and investor-to-state disputes. The Government support those basic principles, although there are some important issues in the agreement on which we are not yet fully satisfied. I shall return to those.
If an agreement can be reached that increases the confidence and security of foreign investors, and if the detailed terms are right and our specific concerns are properly addressed, we shall want to sign it. However, I make no bones about the fact that there is some way to go. It might be useful to explain the state of the negotiations, to clarify some confused recent press coverage. In late May last year, which was the original deadline for completing the negotiations, OECD Ministers unanimously decided to extend the time limit to the next OECD ministerial meeting on 27 and 28 April this year. However, at a high-level meeting last week to prepare for the April event, the United States stated that it would not be ready to reach an agreement by April. All OECD countries accepted that they should intensify their efforts to resolve outstanding issues, with a view to making as much progress as possible by April, and that, in the light of that progress, it was for OECD Ministers at the April meeting to decide what to do next.
At this stage, the most important outstanding issues for the UK are the treatment of environmental and other regulatory issues, labour standards and the listing of "exceptions", by which countries may reserve the right not to accept MAI obligations in full in particular sectors or in relation to categories of governmental activity. On environmental and labour matters, there has been a distinct change of policy by the UK. This Government have been taking the lead in ensuring that the MAI will not undermine regulation in those sectors, as some people claimed it might. It is essential that we avoid that, and I am confident that we shall, as all participants in the negotiations recognise the need to do so.
In addition, we have pressed hard for unambiguous reaffirmation in the MAI of commitments to sustainable development and core labour standards; for close association with the MAI of OECD guidelines for multinational enterprises, which are collective recommendations by OECD Governments to multinationals on good corporate behaviour; and for a strong and binding provision on not waiving environmental or labour standards to attract particular investments. That is one of the important questions that my hon. Friend has put to me. The majority now share our strong line on those points, although some remain to be persuaded.
It was this UK Government who proposed a review of the MAI and environmental policy. The first part, an overview of the literature on foreign direct investment and the environment, is on the internet. The second part, on the relationship between the MAI and multilateral environmental agreements, is under discussion and should be available shortly.
In short, the Government are absolutely determined to ensure that there is no risk that the MAI will undermine environmental protection and labour standards.

Dr. Lynne Jones: Will my hon. Friend give way?

Mrs. Roche: May I finish this point?
We have said it many times before and I say it again: if there were such a risk, we would not sign the agreement.

Dr. Jones: The Minister has answered my question. I was going to seek the assurances that she has just given.

Mrs. Roche: I am grateful to my hon. Friend.
The Government believe that, far from being a threat to environmental and other standards, the MAI provides a useful opportunity to encourage all participants to raise their standards, but we do not believe that it would be either right or practicable to make the MAI an instrument by which to impose particular labour or environmental standards on other countries. There would be a danger of deterring potential members from joining, without achieving any improvement in standards. The Government are working hard in the appropriate forums to raise international labour and environmental standards.
I hope that I can allay other anxieties that have been expressed. The idea that an investor should be allowed to challenge the state has been received with horror in some quarters. It has been suggested that that is a threat even to democracy, but private interests can and do mount legal challenges to state decisions in the UK and in other democracies, and binding international arbitration for investor-to-state disputes has existed for many years in the UK's numerous bilateral investment treaties. What is new in the MAI is binding international arbitration for investor-to-state disputes, over a wider range of issues than in existing bilateral treaties.
My hon. Friend the Member for Broxtowe mentioned local government. The agreement will apply to all levels of government, including local government, but it will not obstruct local government or interfere with programmes that are aimed at increasing employment opportunities for local people. We would not expect nationality of ownership to be a factor in local government decisions, but we have consulted local authorities. They have not identified any problems or any need for exceptions. If any do come to light, we shall, of course, consider them.

Ms Julia Drown: I understand that the USA has sought exemption for its states and local government. If so, surely that should ring warning bells for us to protect our national and local government.

Mrs. Roche: As part of the negotiations, countries will try to get exemptions. I am stating the position, as we understand it, from the UK's viewpoint and giving an assurance that we have consulted local government. If it raises objections, we shall certainly consider them.
My hon. Friend the Member for Broxtowe asked about developing countries. The agreement will not be forced on reluctant developing countries. Many have attended seminars in Latin America, Asia and Africa to learn more about the MAI. For many of the more advanced


developing countries, the MAI is an attractive opportunity. Argentina, Brazil, Chile, Hong Kong, China and Slovakia are already observers at the negotiations and are keen to join at the earliest possible stage. Others are queueing up for the same treatment. The reason is, of course, that inward investment is a key element in their development plans. Naturally, we recognise that many of the least developed countries may have difficulty taking on the full range of obligations immediately. Negotiations are progressing on how to tackle that. It is important to do that.
Whatever the solution, the British Government will be determined to ensure that the agreement does not damage the interests of the poorest countries. If possible, it should offer opportunities to the developing world as a whole. As has already been mentioned, the Department for International Development has commissioned a review of any implications that the MAI may have for poorer developing countries. That will be made public upon completion.

Mr. Corbyn: Will my hon. Friend give way on that point?

Mrs. Roche: I should like to make progress. I would usually give way, but I am anxious—

Mr. Corbyn: Will my hon. Friend give way?

Mrs. Roche: Yes, but very briefly.

Mr. Corbyn: When will the report be ready?

Mrs. Roche: It will certainly be ready before April and will be available for consideration.
One persistent complaint in the press and in documents from the non-governmental organisations is that the MAI negotiations have been secret. That was mentioned by my hon. Friend the Member for Stoke-on-Trent, North (Ms Walley). That is simply not the case, either in the UK or in the OECD. The start of the negotiations was announced, as were other milestones. Representatives of labour and business have been kept in close touch, as have trade unions and local government.
More recently, in response to legitimate NGO interest, many groups have had discussions with officials and with my noble Friend Lord Clinton-Davis. There have been various public events. In the OECD, there have been briefings after meetings of the negotiating group, consultations with non-member countries and consultations with NGOs. The current draft text is available on the internet. My hon. Friend the Member for Stoke-on-Trent, North raised a point about parliamentary scrutiny. All the appropriate parliamentary scrutiny processes will be adhered to.
The next major stage in the process will be the ministerial meeting in April, at which OECD Ministers collectively can review progress and the prospects for achieving a satisfactory agreement.

Ms Walley: Have the opportunities for detailed parliamentary scrutiny by Select Committees passed by? How can we have influence before a decision is made?

Mrs. Roche: The opportunity has not gone by. All the European scrutiny processes of Select Committees and Standing Committees will have to be undertaken.
My hon. Friend the Member for Broxtowe raised a number of other points. The United Kingdom strongly supports the European Union-wide position against Helms-Burton. He asked about sanctions. Any United Nations sanctions would prevail over MAI obligations. He also raised an important question about trading pollution quotas. That would not be prohibited.
We do not think that there is a possibility of even a partial agreement in April, but, even if there were, we would not postpone our aims on environmental and labour standards.
This has been a welcome opportunity to hear hon. Members' views. It is important that we consult widely during our presidency of the European Union and beyond. We shall ensure that the consultation process is as wide as possible.
I hope that I have explained the Government's position in the short time available. Our stance is balanced. The MAI is potentially a useful agreement, but we must get it right. We shall keep the House informed.

Question put and agreed to.

Adjourned accordingly at twenty-nine minutes to Twelve midnight.